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Temos um favor a perguntar Desabilite seu bloqueador de anúncios (ou atualize suas configurações para garantir que o javascript e os cookies estejam ativados), para que possamos continuar fornecê-lo com as notícias do mercado de primeira linha E os dados que você espera de nós. Centro de Política e Administração Tributária Glossário de Termos de Imposto Descargo de Responsabilidade: As explicações sobre os termos são muito condensadas e podem não estar completas.160 Não são considerados necessariamente refletir a posição oficial da OCDE na interpretação de normas internacionais Termos fiscais, por exemplo, no contexto do tratado tributário. ABAIXO - Uma redução na avaliação de imposto, pena ou juros quando se determina que a avaliação é incorreta ABUSO DE LEI - A doutrina que permite que as autoridades fiscais ignorem um formulário de direito civil usado pelo contribuinte que não tem base comercial ACELERADO DEPRECIAÇÃO - Método de depreciação segundo o qual os contribuintes podem atribuir maiores deduções de depreciação ao primeiro ano ou aos primeiros anos de ativos úteis da empresa, tais como instalações e máquinas BASE DE CONTABILIDADE160 - Método de cálculo dos valores sujeitos a imposto de renda e IVA. No que diz respeito ao IVA, o imposto seria calculado como uma taxa percentual sobre o excesso de vendas sobre as compras. Este é um conceito teórico e nenhum país o usa. PERÍODO DE CONTABILIDADE160 - Período de tempo utilizado pelo contribuinte para apuração do imposto de renda e contribuição social CONTAS A PAGAR160 - Lista dos débitos atualmente devidos por pessoa física ou jurídica, principalmente para aquisição de serviços, estoques e suprimentos CONTAS A RECEBER160 - A Lista do dinheiro devido em conta corrente a um credor, que é mantido no curso normal do negócio de credores e representa reivindicações e transações pendentes RECURSOS CONTABILÍSTICOS160 - Todos os documentos e livros usados na preparação da declaração de imposto e todas as demonstrações financeiras, Incluindo o livro-razão geral, livros-razão subsidiários, boletins de vendas e faturas. - Método contábil pelo qual os itens de receita e despesa são incluídos na receita ou despesa tributável à medida que são ganhos ou incorridos, e não quando são recebidos ou pagos. IMPOSTO AD VALOREM - Imposto sobre bens ou propriedades Expressa em percentagem do preço de venda ou do valor de avaliação EMPRESA ADMINISTRATIVA 160 - Consultar: Empresa de serviços DESPESAS ADMINISTRATIVAS160 - Despesas que não são tão facilmente associadas a uma função específica como são os custos diretos de fabricação e venda. Inclui tipicamente despesas do escritório da sede e despesas contábeis. ESCRITÓRIO ADMINISTRATIVO160 - Escritório freqüentemente localizado em um país que não seja o da matriz, a empresa-mãe ou país de operação. - Um acordo que determina, antes das operações controladas, um conjunto adequado de critérios (por exemplo, método, comparáveis e adequados ajustamentos a eles, pressupostos críticos quanto a eventos futuros) para a determinação dos preços de transferência para Essas transacções durante um período de tempo fixo.160 Um acordo prévio de fixação de preços pode ser unilateral envolvendo uma administração fiscal e um contribuinte ou multilateral envolvendo o acordo de duas ou mais administrações fiscais. ADVANCE RULING160 - Carta que é uma declaração escrita, emitida para um contribuinte pelas autoridades fiscais, que interpreta e aplica a legislação fiscal a um conjunto específico de fatos. EMPRESAS AFILIADAS 160 - Termo geral usado para descrever a relação entre dois ou mais Empresas ligadas por um interesse comum AFILIATION PRIVILEGE160 - Isenção ou isenção fiscal concedida às distribuições de dividendos efectuadas por uma filial residente à sua sociedade-mãe, que detém uma determinada percentagem mínima de acções, a fim de atenuar a dupla tributação desses dividendos. AGÊNCIA160 - Uma empresa que fornece um serviço específico a uma empresa (que está fora do país onde a agência está localizada). A agência dependente constitui um estabelecimento permanente para a outra empresa e os rendimentos obtidos através da agência são tributados sobre os rendimentos obtidos do país onde a agência está localizada, enquanto a agência independente não. AGREGAMENTO160 - Termo usado para indicar a somatória dos rendimentos dos contribuintes de todas as fontes para determinar a alíquota de imposto aplicável para fins de imposto de renda. ALIEN, TRATAMENTO FISCAL OF160 - Uma pessoa que não é um cidadão do país em que ele ou ela vive. Em geral, a maioria dos países não faz distinção entre nacionais e estrangeiros para fins fiscais, mas a responsabilidade fiscal é baseada na residência e / ou no domicílio. ALIENAÇÃO DE RENDIMENTO160 - Termo geralmente usado para descrever a transferência do direito de receber renda de uma fonte enquanto não necessariamente transfere a propriedade dessa fonte para a mesma pessoa. REPARTIÇÃO160 - A repartição ou cessão de receitas ou despesas para vários fins fiscais, p. Entre estabelecimentos permanentes em várias jurisdições ALLOWANCE160 - Dedução ou isenções geralmente feitas no cálculo do imposto de renda, herança e impostos de doações e algumas formas de impostos sobre vendas. AMORTIZAÇÃO160 - Processo de amortização do custo de um ativo intangível ao longo de sua vida útil. MÉTODO DE AMORTIZAÇÃO160 - Método de cálculo de um crédito ao abrigo de um regime de IVA em que são adquiridos bens de investimento que têm uma vida útil no negócio por um período superior a um ano. O imposto incorporado no preço pago pelos activos pode ser creditado ao comerciante ao longo de um período de anos correspondente à vida dos activos. Um dos métodos usados para alocar receitas e despesas entre empresas relacionadas usando uma fórmula consistiu em alguns fatores, como vendas, propriedade ou folha de pagamento. ARBITRAGE160 - Processo de compra de uma mercadoria (que pode incluir moeda ou títulos) e simultaneamente vendê-lo em outro mercado, a fim de lucrar com os diferenciais de preços. ARBITRAGE, TAX160 - Processo de entrar em uma transação motivada por impostos (ou seja, para obter lucro da aplicação de regras fiscais). ARBITRAGEM160 - Termo utilizado para a determinação de um litígio pelo julgamento de uma ou mais pessoas, chamados árbitros, escolhidos pelas partes e que normalmente não pertencem a um tribunal normal de jurisdição competente. Que estabelece que, quando as condições entre empresas relacionadas são diferentes das entre empresas independentes, os lucros acumulados em virtude dessas condições podem ser incluídos nos lucros dessa empresa e tributados em conformidade ARMAS LENGTH RANGE160 - Um termo usado em preços de transferência Para descrever uma gama de valores que podem ser definidos para efeitos de selecção de um preço de comprimento apropriado de armas a partir de transacções comparáveis. TRANSAÇÃO DE COMPRIMENTO DE ARMAS - Uma transação entre as partes, cada uma das quais age em seu próprio interesse. De um modo geral, as empresas estão associadas quando as mesmas pessoas participam directa ou independentemente na gestão, no controlo ou no capital de ambas as empresas, ou seja, ambas as empresas estão sob controlo comum. REGRAS DE ATRIBUIÇÃO160 - Regras que criam propriedade ao atribuir ações a uma parte mesmo que as ações sejam legalmente de propriedade de outra parte, muitas vezes denominada propriedade construtiva de ações. - Exame e verificação efectuados por um organismo externo (tal como uma empresa de contabilidade ou pelas autoridades fiscais) de livros e contadores de um contribuinte e / ou a exactidão geral de declarações e declarações, quer como operação de rotina, quer em caso de suspeita de evasão. ACTIVIDADES AUXILIARES 160 - Um estabelecimento fixo por meio do qual uma empresa exerce unicamente uma actividade que tem, para a empresa, um carácter preparatório ou auxiliar, é considerado, nos termos dos tratados fiscais, não um estabelecimento permanente. O critério decisivo é o de saber se a actividade do estabelecimento fixo constitui, por si só, uma parte essencial e significativa da actividade da empresa no seu conjunto. COMPANHIA AUXILIAR 160 - Empresa que faz parte de um grupo de empresas e que fornece serviços auxiliares a empresas do grupo. AVOIDANCE160 - Um termo que é difícil de definir, mas que é geralmente usado para descrever o arranjo de um negócio de contribuintes que se destina a reduzir a sua responsabilidade fiscal e que, embora o acordo poderia ser estritamente legal, é geralmente em contradição com a intenção do Lei que pretende seguir. Cf. Evasão PRÉ-VOLTAR160 - Método de empréstimo entre partes relacionadas quando um empréstimo é canalizado através de um terceiro intermediário independente. BAD DEBT160 - Dívida que é improvável de ser paga. Empréstimos inadimplentes podem geralmente ser tratados como perdas e baixados contra uma reserva para tais dívidas. BALANÇO160 - Demonstração da posição financeira de uma empresa a partir de uma determinada data. A declaração mostrará os ativos de negócios em uma coluna e seus passivos e proprietários de capital em outra coluna. PAGAMENTO DE EQUILIBRAMENTO160 - Um pagamento, normalmente de um ou mais participantes para outro, para ajustar participantes8217 proporção de partes de contribuições, que aumenta o valor das contribuições do pagador e diminui o valor das contribuições do beneficiário pelo montante do pagamento , No contexto do CCA (Cost Contribution Arrangements). DISPOSIÇÕES RELATIVAS AO SECRETO DO BANCO160 - Disposições que exigem que um banco se recuse a divulgar informações sobre seus clientes a terceiros, incluindo as autoridades fiscais. BAPA160 - Arranjo bilateral antecipado de preços. Também chamado MAP APA. BASE COMPANY160 - Empresa situada em um país de baixa tributação ou não fiscal (ou seja, paraíso fiscal), que é usado para abrigar renda e reduzir impostos no país de origem dos contribuintes. As empresas de base exercem certas atividades em nome de empresas relacionadas em países de alta tributação (por exemplo, serviços de gerenciamento) ou são usadas para canalizar certos rendimentos, como dividendos, juros, royalties e taxas. BASE COST160 - Termo usado na legislação de imposto sobre ganhos de capital para indicar o custo de um ativo para um proprietário. BEARER SECURITIES160 - Ações, títulos, etc. em que a propriedade pode ser transferida de um portador para outro sem registro da transação pela empresa emissora, ou seja, o título passa com a entrega. BENEFICIAL OWNER160 - Uma pessoa que goza os benefícios reais de propriedade, mesmo que o título para a propriedade está em outro nome. Muitas vezes importante nos tratados fiscais, como um residente de um parceiro tratado fiscal pode ser negado os benefícios de determinadas taxas reduzidas imposto de retenção se o beneficiário dos dividendos etc é residente de um país terceiro. BENEFICIÁRIO160 - A pessoa que recebe ou recebe os benefícios decorrentes de determinados atos. Em um contexto fiscal, o beneficiário é a pessoa com direito aos benefícios de propriedade de confiança ou de uma apólice de seguro. BENEFÍCIOS EM KIND160 - Prazo que se refere a ganhos, geralmente de emprego, que não em dinheiro, como parte da compensação por serviços prestados. TESTE DE BENEFÍCIO160 - Ao considerar se uma empresa pode ser autorizada a deduzir como despesa os pagamentos feitos a uma empresa coligada de um grupo multinacional por conta de despesas incorridas por essa empresa coligada na prestação de serviços intragrupo, as autoridades fiscais recusariam uma Dedução, a menos que tenha sido concedido um benefício real à empresa que reclama a dedução. BERRY RATIO160 - Relação usada para estabelecer um lucro de comprimento de armas. O rácio Berry é a razão entre o rendimento bruto de uma empresa e os custos operacionais. MELHOR MÉTODO REGRA160 - Regra de preços de transferência que exige que um contribuinte use o método de preço de transferência que resulta na medida mais confiável de um preço de comprimento de braços. Esta regra não prescreve prioridades entre vários métodos. DISPOSIÇÃO BILATERAL DE PREÇOS ANTERIORES160 (BAPA) 160APA - envolvendo duas ou mais autoridades fiscais BOND160 - Obrigações de dívida com juros para um governo ou empresário. A taxa de juros geralmente é fixa. VALOR DE LIVRO160 - Valor do ativo individual registrado nos registros contábeis de um contribuinte, calculado como custo real menos as provisões para qualquer depreciação. BRACKETS160 - Termo usado em conexão com o sistema graduado de tributação para referir, por exemplo, às lajes ou De rendimentos tributáveis sujeitos a taxas específicas de imposto sobre o rendimento. BRANCH160 - Divisão, escritório ou outra unidade de negócio localizada em um local diferente do escritório principal ou sede. Não é uma entidade jurídica distinta. IRRÍCIO TÍTULO FISCALIDADE (BPT) 160 - Ver: Imposto de Sucursal TRIBUTO FISCAL160 - Imposto sobre sucursais de empresas estrangeiras além do imposto de renda normal sobre o rendimento das filiais. Isto equivale ao imposto sobre os dividendos que seria devido se a filial tivesse sido uma subsidiária (veja: subsidiária) da empresa estrangeira e tivesse distribuído o seu lucro como dividendos. BROTHER-SISTER CORPORATIONS160 - Duas ou mais empresas que são detidas e controladas pelos mesmos accionistas. CARGO DA PROVA160 - Obrigação de persuadir um tribunal ou outra entidade da validade de uma afirmação factual. ATIVO EMPRESARIAL160 - Ativos utilizados para fins de exploração de uma empresa OBJECTIVO TEST160-- Teste utilizado como arma contra esquemas de evasão fiscal. Os regimes artificiais que criam circunstâncias sob as quais não é cobrado qualquer imposto ou imposto mínimo podem não ser tidos em conta se não servirem a uma finalidade comercial. PAGAMENTO DE COMPRA160 - Pagamento feito por um novo participante a um CCA (Custo Contribuição Arranjos) já ativo para obtenção de interesse em qualquer resultado de atividade anterior do CCA. PAGAMENTO DE COMPRA 160 - Compensação que um participante que se retira de um CCA já ativo pode receber dos participantes restantes para uma transferência efetiva de seus interesses nos resultados de atividades de CCA anteriores. CAPITAL ASSETS160 - Todos os bens detidos para investimento por um contribuinte. OPÇÃO DE CHAMADA160-- Contrato ao abrigo do qual o detentor da opção tem o direito, mas não a obrigação de comprar títulos ou mercadorias em ou antes de uma data específica para um preço de exercício especificado. DESPESAS DE IMPOSTO160 - Despesas de melhoria em vez de reparação. Quando as despesas estão mais estreitamente ligadas à estrutura de rendimento do negócio do que à sua capacidade de obtenção de rendimento, são as despesas de capital.160 GANHO DE CAPITAIS160 - Ganho na venda de activos de capital. CAPITAL TAX160 - Imposto baseado em participações de capital, em oposição a um imposto sobre ganhos de capital. CAPITALIZE160 - Para registrar desembolsos de capital como adições para contas de ativos, não como despesas. PERDA DE CAPITAL160 - A perda resultante da venda de um ativo de capital. CAPTIVE BANK160 - subsidiária integral de um grupo multinacional de empresas cujo objetivo é prestar serviços bancários ao grupo e aqueles com quem o grupo negocia. Um banco cativo é geralmente localizado em um paraíso fiscal, a fim de aproveitar as exigências de capital de baixa e livre de controle de câmbio. CAPTIVE INSURANCE COMPANY160-- Filial integral de um grupo multinacional de empresas que assegura ou reassurece exclusivamente os riscos das empresas que pertencem ao grupo. Uma companhia de seguros cativa é geralmente estabelecida em um país de baixo imposto. Se os prêmios pagos às empresas de seguros cativos são reconhecidos como despesas de negócios depende do país em questão. CARRYBACK160 - Processo pelo qual as deduções ou créditos de um ano tributável que não podem ser usados para reduzir a responsabilidade tributária nesse ano são aplicados contra um passivo de imposto nos anos subseqüentes (carryforward) Ou anos anteriores (carryback). BASE DE CAIXA (MÉTODO DE CAIXA) 160 - O método contábil que reconhece rendimentos e deduções quando o dinheiro é recebido ou pago. CCA160 - Consultar: Modalidades de Contribuição de Custos GESTÃO CENTRAL E CONTROLO160 - Onde a administração central e controle está localizado é um teste para estabelecer o local de residência de uma empresa. Em termos gerais, refere-se ao nível mais alto de controle dos negócios de uma empresa. CENTRO DE INTERESSE VITAL160 - Este é um dos critérios usados para resolver o problema da residência dupla de indivíduos. Refere-se ao lugar onde os contribuintes relacionamentos pessoais e econômicos estão mais próximos. CFC160 - Consultar a empresa estrangeira controlada CHERRY PICKING 160 - Termo usado nos EUA em acordos RampD para impedir que uma parte contratante selecione ou financie apenas as tecnologias que são desenvolvidas com sucesso, isto é, picking cereja. No contexto dos preços de transferência, descreve frequentemente uma situação em que uma autoridade fiscal tenta impor um ajustamento de TP a um contribuinte com base em algumas operações de partes relacionadas de outras empresas comparáveis com a intenção de maximizar o seu ajustamento. CIF VALOR160-- O valor das mercadorias importadas que inclui custo, seguro e frete. DIREITO CIVIL160-- Sistemas de Direito baseados principalmente em estatutos ou códigos e não em decisões judiciais. Exemplos são os sistemas francês e alemão. CLOSE (CLOSELY HELD) COMPANY160 - Empresa detida ou controlada por um único accionista ou grupo de accionistas estreitamente unidos. COMMENSURATE COM NOME DE RENDIMENTO160-- Veja: Super provisão de royalties INTANGIBLE COMERCIAL160-- Um intangível que é usado em atividades comerciais como a produção de um bem ou a prestação de um serviço, bem como um direito intangível que é em si um bem comercial transferido A clientes ou utilizados na operação de negócios. COMMODITIES FUTURES160 - Contratos, negociados em mercados de futuros reconhecidos, nos quais os vendedores prometem entregar uma determinada mercadoria até uma determinada data a um preço predeterminado. Imposto baseado em um número seletivo de commodities. LEI COMUM160 - O corpo de lei desenvolvido pelo judiciário em sistemas baseados no direito inglês e que é seguido pela doutrina do precedente, isto é, decisões judiciais passadas sobre casos semelhantes. Muito do que é agora incorporado no estatuto.160 Também este termo é usado para descrever um sistema baseado em sistemas jurídicos ingleses, em oposição aos sistemas de direito civil. STOCK160 comum - O estoque ordinário de uma corporação. Uma participação acionária ou participação em uma corporação. O detentor de ações ordinárias geralmente tem um voto na decisão negócios da empresa. O estoque comum é geralmente último na prioridade quando os lucros ou os recursos são distribuídos. EMPRESA160 - Frequentemente usado para significar uma entidade jurídica separada (uma corporação) organizada para executar uma atividade, empresa ou empresa industrial.160 Às vezes, tem um significado mais amplo significar empresas individuais ou coletivas que buscam lucros. ANÁLISE DE COMPARABILIDADE160 - Comparação de condições de transação controlada com condições prevalecentes em transações entre empresas independentes (transações não controladas). As transacções controladas e não controladas são comparáveis se nenhuma das diferenças entre as transacções puder afectar materialmente o factor que está a ser examinado na metodologia (por exemplo, preço ou margem) ou se puderem ser feitos ajustamentos razoavelmente precisos para eliminar os efeitos materiais de tais diferenças. MÉTODO DE LUCRO COMPARÁVEL (CPM) 160 - De acordo com as regulamentações dos EUA CPM é um método para determinar uma consideração de comprimento de armas para transferências de propriedade intangível. Se o lucro operacional relatado da parte testada não estiver dentro de um certo intervalo, um ajuste será feito. Com efeito, este método requer uma comparação do rendimento operacional que resulta da contrapartida efectivamente cobrada numa transferência controlada com o rendimento operacional de contribuintes semelhantes que não são controlados. MÉTODO COMPARÁVEL DE PREÇOS NÃO CONSTELADOS 160. Um método de precificação de transferência que compara o preço dos bens ou serviços transferidos em uma transação controlada com o preço cobrado por bens ou serviços transferidos em uma transação não controlada comparável em circunstâncias comparáveis. MÉTODO COMPARABLE UNCONTROLLED TRANSACTION (CUT) 160 - Uma metodologia de preços de transferência utilizada nos EUA, que determina uma taxa de royalties de comprimento de braço para um intangível por referência a transferências não controladas de bens intangíveis comparáveis em circunstâncias comparáveis. AJUSTE DE COMPENSAÇÃO160 - Um ajuste no qual o contribuinte reporta um preço de transferência para fins tributários que é, na opinião dos contribuintes, um preço de longa distância para uma transação controlada, mesmo que este preço difira do montante realmente cobrado entre as empresas associadas. Este ajuste seria feito antes da declaração de imposto é arquivado. COMPENSAÇÃO160 - Recompensas diretas e indiretas monetárias e não monetárias aos empregados. Opções de ações compensatórias160 - Opções oferecidas aos empregados como compensação parcial por seus serviços. AUTORIDADE COMPETENTE (CA) 160 - Foro para resolver disputas decorrentes da aplicação e / ou interpretação de um tratado de dupla tributação. Ambos os países signatários designam um representante (frequentemente o Ministério das Finanças ou o seu representante autorizado) como CA para ajudar os contribuintes lesados, agindo como ligação oficial com a CA estrangeira. A CA é geralmente indicada nas seções de definições de tratados fiscais. COMPLIANCE160 - Consultar: Conformidade tributária APROXIMAÇÃO DE CONDUTA160-- Método pelo qual renda ou deduções fluem para outra parte CONDUIT COMPANY160 - Empresa constituída em conexão com um esquema de evasão fiscal, pelo qual o rendimento é pago por uma empresa para o canal e então redistribuído CONSIDERANDO160 - Qualquer coisa de valor, incluindo a propriedade, dada em troca de uma promessa ou desempenho por outra parte para formar um contrato RETORNO DE IMPOSTO CONSOLIDADO160 - Uma declaração de imposto combinada em O nome da sociedade-mãe arquivado por empresas organizadas em grupo. CONSORCIO160 - Associação de empresas, quer sejam pessoas singulares, sociedades ou empresas, que operam em regime temporário para alguma empresa específica. DIVIDENDO CONSTRUTIVO160 - Uma variedade de pagamentos, feitos em dinheiro ou em espécie, feitos por empresas a acionistas ou pessoas a eles associadas, que não são expressos como dividendos, podem, contudo, ser considerados pela legislação tributária como distribuições de lucros e tratados como se fossem Foram dividendos. PROPRIEDADE CONSTRUTIVA160-- Um contribuinte pode ser considerado como possuir propriedade ou ações que ele só indiretamente possui. IMPOSTO AO CONSUMO160 - Normalmente, o imposto recai sobre o consumo final de bens e serviços. FABRICANTE DE CONTRATOS160 - Um fabricante, na maioria dos casos, localizado em uma jurisdição de baixo custo, que tem uma licença para usar uma propriedade intangível desenvolvida por sua empresa-mãe. O fabricante usa a propriedade intangível para produzir a propriedade tangível que é então revendida à matriz para a distribuição aos clientes finais. ANÁLISE DE CONTRIBUIÇÃO160 - Quando o método de divisão do lucro é aplicado em casos de preços de transferência, uma análise de contribuição exige que o lucro combinado seja dividido entre empresas associadas com base no valor relativo das funções desempenhadas por cada uma das empresas associadas participantes da operação controlada . CONTROLO 160 - A capacidade de uma pessoa para assegurar que uma outra pessoa age de acordo com os desejos da primeira pessoa, ou o exercício dessa capacidade. O exercício do controle por uma pessoa sobre outra poderia permitir que indivíduos e corporações evitassem ou reduzissem sua responsabilidade tributária. Geralmente, uma empresa é considerada como controladora de outra empresa se possuir mais de 50 ações com direito a voto. No entanto, as definições variam de acordo com o país ea situação. CONTROLO DE EMPRESAS ESTRANHAS (CFC) 160 - As empresas, geralmente localizadas em jurisdições fiscais baixas, que são controladas por um acionista residente.160 A legislação CFC costuma ser projetada para combater o abrigamento de lucros em empresas residentes em jurisdições de baixa ou nenhuma tributação. Uma característica essencial desses regimes é que atribuem uma proporção da renda abrigada em tais empresas ao acionista residente no país em questão. Geralmente, apenas certos tipos de rendimentos estão abrangidos pela legislação relativa aos CFC, ou seja, rendimentos passivos, tais como dividendos, juros e royalties. TRANSAÇÃO CONTROLADA 160 - Transações entre duas empresas que são empresas associadas umas em relação às outras. CONTROLE DE JUROS 160 - Propriedade de mais de 50 ações de uma corporação com direito a voto. SOCIEDADE COOPERATIVA 160 - Em geral, as sociedades cooperativas são fundadas para reduzir o preço de compra ou aumentar o preço de venda de certos produtos em benefício de seus membros ou para servir os interesses de seus membros de alguma outra maneira, entre pequenos comerciantes, Consumidores, etc. CENTRO DE COORDENAÇÃO 160 - Empresa cujo único objetivo é coordenar as atividades das empresas afiliadas, realizar pesquisas ou realizar atividades de apoio em benefício dessas corporações. COPYRIGHT 160 - Direito exclusivo concedido aos autores e artistas para publicar, usar e explorar suas obras literárias ou artísticas. IMPOSTO DE RENDA CORPORATIVO 160 - Imposto de renda sobre o lucro das empresas VIA CORPORATIVO 160 - Como uma corporação é uma entidade legal separada, e os acionistas têm interesse na empresa e não em seus ativos, o véu corporativo é usado para descrever a incapacidade Olhar para trás a entidade jurídica e atribuir as ações de ativos, dívidas e responsabilidades de uma empresa para aqueles que estão por trás dele, nomeadamente os accionistas. Tribunais podem às vezes ser capazes de fazer uma atribuição para a pessoa ou pessoas subjacentes. CORPORAÇÃO 160 - Em termos técnicos, significa uma entidade jurídica geralmente fretada por um governo relevante e separada e distinta das pessoas que a possuem. No entanto, é agora comumente usado como outra forma de se referir a uma empresa. (Veja: Companhia) CORPORATION SHOPP ING 160 - Termo usado às vezes além do shopping do tratado para denotar o uso de disposições de tratado de imposto por interposting uma companhia em vez de uma forma diferente de associação para qual o relevo de imposto não estaria disponível. AJUSTAMENTO CORRESPONDENTE 160 - Um ajuste na obrigação tributária da empresa associada em uma segunda jurisdição feita pela administração tributária dessa jurisdição, correspondente a um ajuste primário feito pela administração tributária em uma primeira jurisdição fiscal, de forma que a alocação de lucros Pelas duas jurisdições é consistente. CUSTO 160 - Preço de compra pago pela propriedade ou o valor da troca pela qual a propriedade é dada. ARQUIVO DE CONTRIBUIÇÃO DE CUSTOS (CCA) 160 - Um CCA é um marco acordado entre as empresas para compartilhar os custos e riscos de desenvolver, produzir ou obter bens, serviços ou direitos e determinar a natureza ea extensão dos interesses de cada participante No resultado da atividade de desenvolver, produzir ou obter esses bens, serviços ou direitos. FINANCIAMENTO DE CUSTO 160 - Contribuição de uma empresa coligada para os custos gerais de investigação e desenvolvimento (RampD) de outra afiliada ou membro do grupo, proporcionalmente ao seu volume de negócios ou outro critério CUSTO DE MERCADORIAS VENDIDAS (COGS) 160 - Custos de compra de matérias-primas e produção de produtos acabados. Incluem-se fatores claros, como a mão-de-obra direta da fábrica, bem como outros que são menos nítidos, como COST-PLUS MARK-UP160 - Uma margem que é medida por referência às margens calculadas após a Custos indiretos incorridos por um fornecedor de bens ou serviços em uma operação COST-PLUS METHOD160-- Um método de preço de transferência usando os custos incorridos pelo fornecedor de bens (ou serviços) em uma transação controlada. Um custo adequado acrescido de margem é adicionado a este custo, para obter um lucro adequado à luz das funções desempenhadas (tendo em conta os activos utilizados e os riscos assumidos) e as condições de mercado.160 O que se chega depois de adicionar o custo acrescido de margem Para os custos acima podem ser considerados como um preço de comprimento de braços da transação controlada original. CONTRATO DE CUSTO-PARTICIPAÇÃO160 - Consultar: Contrato de contribuição de custo CPM160-- Ver: Método de lucro comparável CRÉDITO, IMPOSTO ESTRANGEIRO160-- Um método para aliviar a dupla tributação internacional. Se o rendimento recebido do estrangeiro estiver sujeito a imposto no país destinatário, qualquer imposto estrangeiro sobre esse rendimento pode ser creditado contra o imposto nacional sobre esse rendimento.160 A teoria é que isto significa que os rendimentos estrangeiros e domésticos de uma entidade irão, tanto quanto possível Ser tributados de forma semelhante, embora normalmente o crédito permitido seja limitado ao montante do imposto nacional, sem reporte se o imposto for mais elevado no estrangeiro. CRÉDITO, TAX160 - Provisão de dedução ou compensação direta contra o valor do imposto devido em oposição a uma compensação contra o rendimento. CRÉDITO, TAXADO INDIRETO (TAXA INDIRETA) - Em relação a um dividendo, crédito para imposto subjacente é crédito para o imposto incidente sobre os lucros da empresa fora da qual os dividendos foram pagos. Tal alívio pode ser concedido quer ao abrigo de um tratado fiscal quer de acordo com disposições unilaterais. CRÉDITO, TAXA DE RETENÇÃO160 - Diversos tipos de renda (tais como dividendos, juros, royalties) são tributados na fonte, exigindo que o pagador deduza o imposto e contabilize-o para as autoridades fiscais (no exterior). O beneficiário do contribuinte tem o direito de creditar o imposto retido na fonte contra os seus passivos fiscais finais determinados pela legislação fiscal (doméstica) do país em que reside. CREDIT METHOD160 - Ver: Crédito, imposto estrangeiro CREDITOR160-- Uma pessoa que estendeu crédito e a quem o dinheiro é devido um credor MÉTODO CUP160-- Método de preço não controlado comparável ATIVO CIRCULANTE 160-- O dinheiro, contas a receber, estoque e outros ativos Que são susceptíveis de ser convertido em dinheiro, vendido, trocado ou gasto no curso normal dos negócios, geralmente dentro de um ano. DIREITOS ADUANEIROS160 - Impostos sobre bens importados para um país DANOS 160 - O montante recebido (exceto a compensação de trabalhadores) por meio de ação judicial ou ação baseada em direitos de tipo civil ou por meio de um acordo de acordo celebrado em lugar Processo. TAXAS DE MORTE 160 - Impostos sobre a transferência de bens por morte de pessoas. DEBENTURE 160 - Obrigações remuneradas que não são garantidas por qualquer propriedade específica, geralmente emitida por uma corporação ou governo para o público em geral. CAPITAL DA DÍVIDA 160 - Fundos obtidos por meio de vários tipos de empréstimos que normalmente compreendem debêntures e obrigações com juros fixos. DUMPING DE DÍVIDA 160 - Transferir uma dívida ruim para uma empresa do grupo localizada em um país com taxa de imposto mais alta para cancelar a dívida nesse país. RELAÇÃO DA DEBTEQUIDADE 160 - Relação da dívida total de uma empresa ao seu capital ordinário. Se uma dívida corporativa for desproporcionalmente alta em comparação com seu patrimônio líquido, a dívida poderá ser reclassificada como capital, resultando em uma desautorização da dedução de juros e tributação dos fundos como dividendos. INSTRUMENTO DE DÍVIDA 160 - Uma promessa escrita de reembolsar uma dívida, como uma fatura, caução, aceitação de banqueiros, nota, certificado de depósito ou papel comercial. DEBTOR160 -- A person who owes money a borrower DEDUCTION AT SOURCE160 -- See: Withholding tax DEDUCTIONS --160Deduction denotes, in an income tax context, an item which is subtracted (deducted) in arriving at, and which therefore reduces, taxable income. DEEMED INTEREST160 -- If a member of a multinational enterprise (MNE) receives an interest-free loan from an affiliated company, the tax authorities of the lenders country may readjust the lenders profits by adding an amount equal to the interest which would have been payable on the loan had it been made at arms length. DEEP DISCOUNT BOND160 -- See: Zero coupon bond DEFAULT160 -- The failure of a debtor to make timely payments of interest and principal amounts as they come due or to meet some other provision of a bond, mortgage, lease, or other contract. DEFERMENT OF TAX160 -- The postponement of tax payments from the current year to a later year. A number of countries have introduced legislation to counter the kind of tax avoidance whereby a taxpayer obtains a deferment of tax which is not intended by law. Ex) CFC legislation DEFERRED INCOME160 -- Term used to describe income which will be realized at a future date, thus delaying any tax liability. DEFICIENCY -- The excess of a taxpayers correct tax liability for the taxable year over the amount of taxes previously paid for that year. A US concept DELINQUENCY160 -- Tax which is in default (i. e. due but not yet paid) is often referred to as a delinquent tax in North American parlance. DELIVERY160 -- Transfer of goods or an interest in goods from one person to another. DEMAND LOAN160 -- A loan payable on request by the creditor rather than on a specific date. DE MINIMIS -- Phrase used in connection with circumstances in which the full rigour of the tax law is not enforced because, in particular, of the small amount or minor breach which may be involved, particularly in the context of under-assessed or underpaid tax which are not pursued on de minimis grounds. DEPENDENT AGENT160 -- See: Agency DEPENDENT PERSONAL SERVICES160 -- The OECD model tax treaty provides rules for the treatment of salaries, wages and other similar remuneration (i. e. employment income) under the heading dependent personal services. As a general rule, with some exceptions, the right to tax income from dependent personal services is allocated to the country where the employment activities are exercised. DEPLETION -- Deductible expense which reflects the decrease of a natural resource due to extraction of the resource. DEPRECIATION160 -- An accounting technique in which the cost of an asset is allocated over its useful life. DERIVATIVE FINANCIAL INSTRUMENTS160 -- Also known as derivatives.160 These are financial instruments whose values are linked to or depend on the value of a primary (underlying) asset, e. g. debt assets, liabilities and equity securities, commodities or currency. The primary types of derivatives include forward contracts, futures, options and swaps. DESTINATION PRINCIPLE160 -- Principle under a VAT regime which mandates that VAT on goods be paid in the country where the purchaser is resident (i. e. the country of consumption) at the rate that would have applied had the goods been purchased from a domestic supplier. DIRECT CHARGE METHOD160A -- method of charging directly for specific intra-group services on a clearly identified basis. DIRECT COST160 -- Cost identified with a particular transaction, such as raw materials, components and goods, wages and other processing expenses. DIRECT INVESTMENT160 -- Description often given to a substantial investment in the shares of a company. DIRECTIVE160 -- An official order or instruction. In EU context, it means one of the legal instruments issued by the competent institutions of the European Union. A directive is addressed to the Member States requiring them to make such changes to their domestic legislation as necessary to satisfy a provision of one of the EC treaties. DIRECT METHOD OF ALLOCATION OF COSTS160 -- Allocation method where the parent company or group service centre of a multinational enterprise providing central management and other services charges each member of the group directly for individual services rendered. DIRECT TAX160 -- Direct taxes are taxes imposed on income, capital gains and net worth. Gift tax, death duties and property tax are also considered direct taxes. DISCOUNT160 -- Amount by which the face value of a debt obligation exceeds its issue or selling price. DISOLUTION OF CORPORATION160 -- The termination of the legal existence of a corporation. DISTRIBUTION160 -- A payout of cash or property from a corporation to a shareholder. DIVIDENDS160 -- A payment by a corporation to shareholders, which is taxable income of shareholders. Most corporations receive no deduction for it. DOCUMENTATION160 -- Official documents that are used to prove that something is true or correct DOMESTIC CORPORATION160 -- Corporation which is organized or has its place of effective management in a country. DOMICILE160 -- A persons domicile in English common law is his permanent home, the place to which he always intends to return. Residence is the place where an individual lives for a certain period of time, while domicile is the place where an individual makes his permanent home. DOMICILE, FISCAL160 -- Term sometimes used to mean the same as residence. Fiscal domicile does not necessarily have the same meaning as domicile. DOUBLE DIPPING160 -- Term used to indicate the possibility for dual resident companies to deduct the same expenses in two jurisdictions. DOUBLE TAXATION, DOMESTIC AND INTERNATIONAL160 -- Domestic double taxation arises when comparable taxes are imposed within a federal state by sovereign tax jurisdictions of equal rank. International double taxation arises when comparable taxes are imposed in two or more states on the same taxpayer in respect of the same taxable income or capital, e. g. where income is taxable in the source country and in the country of residence of the recipient of such income. DOUBLE TAXATION, ECONOMIC AND JURIDICAL160 -- Double taxation is juridical when the same person is taxed twice on the same income by more than one state. Double taxation is economic if more than one person is taxed on the same item. DOUBLE TAXATION TREATY160 -- See: Tax treaty DTA160 -- Double tax agreement. See Tax treaty. DUAL RESIDENCE160 -- Person or company resident in two or more countries under the law of those countries, because the two countries adopt different definitions of residence. DUTY160 -- Customs duties (sometimes called a tariff) levied on imported products. DUTY-FREE ZONE160 -- Zone usually located next to an international port or airport where imported goods may be unloaded, stored and reshipped without payment of customs duties or other types of indirect taxes, provided the goods are not imported. EARNED INCOME -- Income or compensation derived from personal services in an employment, trade, business, profession or vocation. (cf. investment income) EARNINGS amp PROFITS (EampP) 160-- A term referring to the economic capacity of a corporation to make a distribution to shareholders that is not a return of capital. Such a distribution would constitute a taxable dividend to the shareholder to the extent of current and accumulated earnings and profit under US tax law. EARNINGS BEFORE TAXES 160-- Sales revenue less cost of sales, operating expenses, and interest, before taxes have been paid. EARNINGS STRIPPING 160-- Practice of reducing the taxable income of a corporation by paying excessive amounts of interest to related third parties. ECONOMIC DOUBLE TAXATION 160-- See: Double taxation, economic and juridical ECO TAX 160-- See: Environmental tax EFFECTIVELY CONNECTED INCOME (ECI) 160-- Non-resident alien individuals and foreign corporations engaged in trade or business within the US are subject to US income tax on income, from sources both within and outside the US, which is effectively connected with the conduct of the trade or business within the US. Income is effectively connected if it is derived from assets which are used in or held for use in the US, and the activities of the US business were a material factor in the realization of the income. EFFECTIVE TAX RATE 160-- The rate at which a taxpayer would be taxed if his tax liability were taxed at a constant rate rather than progressively. This rate is computed by determining what percentage the taxpayer8217s tax liability is of his total taxable income. EMPLOYEE PROFIT SHARING 160-- System under which the employees of an enterprise are entitled by employment contract or by law to a share in the profits made by the enterprise. EMPLOYEE STOCK OPTION160-- An opportunity for employees to purchase stock (shares) in the company they work for, often at a discount from fair market value. Generally it is provided as an incentive to stay with the employer until the options vest. EMPLOYMENT INCOME 160-- Income source of individuals, covering income derived from labour or other current or former dependent personal services such as salaries, wages, bonuses, allowances, compensation for loss of office or employment, pensions and, in some countries, certain social security benefits. ENTERTAINER 160-- Income of a professional entertainer e. g. a musician, actor or other artiste, or sportsman is, in many cases, treated differently from income of persons carrying on other independent profession. ENTITY160 -- In general for tax purposes, an organization, person or party that possesses separate existence. Options include corporations, partnerships, estates and trusts. ENVIRONMENTAL TAX 160-- Tax imposed for environmental reasons, e. g. to provide an incentive to reduce certain emissions to an optimal level or taxes on environmentally harmful products. EQUAL TREATMENT 160-- General principle of taxation that requires that taxpayers pay an equal amount of tax if their circumstances are equal. EQUITABLE INTEREST 160-- An equitable interest in an asset is the interest of the beneficial owner this may or may not be the same person as the legal owner. EQUITY 160-- 1. The extent of a persons beneficial ownership of a particular asset. This is equivalent with the value of the asset minus the liability to which the asset is subject.160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160 2. Paid-in capital plus retained earnings in a corporation160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160160 3. The ownership interest possessed by shareholders in a corporation - stock as opposed to bonds. EQUITY CAPITAL 160-- A method of financing a business where money is received by the issuance of shares in the enterprise. ESOP 160-- Employee stock ownership plan ESTATE160 -- Broadly, all that a person owns, whether real property or personal property, for instance, the estate one leaves at death. ESTATE DUTYTAX 160-- See: Death duties ESTIMATED ASSESSMENT 160-- For income tax purposes, where the records kept, particularly by small traders, are inadequate for a precise calculation of tax due, it may be necessary for the taxable income or profits to be calculated by the tax authorities on the basis of an estimate. ESTOPPEL -- Rule under which one is precluded and forbidden by law to speak against his own act or deed. If a certain position has been taken, another person has relied on that, and you are aware of that reliance, there is often an estoppel against you arguing the contrary to your original position in a court proceeding. EUROBOND 160-- International bond issued by a company in a market other than its domestic market. Eurobonds may take the form of loans, debentures or convertible debentures, and maybe designated in any currency. EURODOLLARS160 -- Dollars originally deposited in US banks that are acquired by persons resident outside the United States and held abroad, mainly in Europe. Eurodollars are used by foreign banks as a method of financing loans to other local or foreign banks or to commercial borrowers. EUROPEAN COMMISSION160 -- The Commission is the executive institution of the European Union charged with the task of administering all policy within the Union. EUROPEAN UNION160 -- See: Treaty on European Union EVASION160 -- A term that is difficult to define but which is generally used to mean illegal arrangements where liability to tax is hidden or ignored, i. e. the taxpayer pays less tax than he is legally obligated to pay by hiding income or information from the tax authorities. EXAMINATION160 -- The checking of a taxpayers tax return, accounts, self-assessment calculations, etc. The process may or may not include an audit of the taxpayers own books. EXCHANGE CONTROL160 -- Restriction of the amount of a particular foreign currency that can be bought or sold EXCHANGE OF INFORMATION160 -- Most tax treaties contain a provision under which the tax authorities of one country may request the tax authorities of the other country to supply information on a taxpayer. Information may only be used for tax purposes in the receiving country and it must be kept confidential, i. e. it can only be disclosed to the persons or authorities concerned with the assessment or collection of taxes covered by the treaty. EXCISE TAX160 -- A tax imposed on an act, occupation, privilege, manufacture, sale, or consumption. EXCLUSIONS160 -- Term used to describe income which is exempt, i. e. not included, in the calculation of gross income for tax purposes. EXEMPTION METHOD160 -- See: Foreign tax relief EXEMPTIONS160 -- Tax laws frequently provide specific exemptions for persons, items or transactions, etc. which would otherwise be taxed. Exemptions may be given for social, economic or other reasons. EXPATRIATE160 -- Persons who have left their country and live abroad. EXPATRIATION RULES160 -- Rules under which a taxpayer continues to be subject to tax when he relinquishes his residence or his citizenship in order to avoid tax. EXPENSES160 -- Costs that are currently deductible, as opposed to capital expenditures, which may not be currently deducted but must be depreciated or amortized over the useful life of the property. EXPORT DUTY160 -- Tax levied on exports of basic commodities entering into world trade, such as rubber, copper, palm oil, sisal, tea, cocoa and coffee EXTENDED LIMITED TAX LIABILITY160 -- Principle according to which certain taxpayers (i. e. those subject to individual income tax, net worth tax and succession duty) who leave a tax jurisdiction and move to a low-tax country are subject to taxation in the former country of residence for a certain period of time after the move. FACTORING -- Financial transaction whereby an enterprise sells its debt-claims to a third party in order to obtain cash (although less than the full amount of the debt). The third party then assumes responsibility for the administration and collection of the debt on the due date for its own account. FAIR MARKET VALUE160 -- The price a willing buyer would pay a willing seller in a transaction on the open market. FEDERAL REGISTER160 -- A daily publication by the U. S government that prints the regulations of the various governmental agencies. FEDERAL TAX160 -- In federal states, taxation may exist on two levels: taxation by the federation or confederation, and taxation by the state or provinces. FEE160 -- Fees charged by central or local governments can be distinguished from taxes when they are charged as payments for the supply of particular services by the authorities. Fees are usually not considered taxes when listing taxes to be included in a double tax treaty. FIDUCIARY160 -- A person, company, or association holding assets in trust for a beneficiary. FIELD AUDIT160 -- An examination of a tax return by tax authorities at the taxpayers place of business. FIFO160 -- Method of valuing inventory on the basis of first in, first out, where goods or materials purchased first are regarded as those which are sold first. FINAL TAX160 -- Under tax treaties the withholding tax charged by the country of source may be limited to a rate lower than the rate which would be charged in other circumstances - this reduced rate is then the final tax in the country of source. FINANCE COMPANY160 -- A company, usually a wholly owned subsidiary, which borrows funds from within or outside a group of companies and onlends the funds to affiliates. A finance company is, in many cases, established in a low or no tax jurisdiction. FINANCE LEASE160 -- Lease where the lessor is considered only as a financier. The lessee is regarded as the owner of the leased assets. Cf. Operating Lease FINANCIAL STATEMENT160 -- Report which contains all of the financial information about a company. The report generally consists of a balance sheet, income statement and may include other information as well. FINANCIAL STRUCTURE160 -- The makeup of the right-hand side of a companys balance sheet, which includes all the ways it assets are financed. FIRST IN, FIRST OUT (FIFO)160 -- See: FIFO FISCAL DOMICILE160 -- See: Domicile, fiscal FISCAL NULLITY DOCTRINE160 -- Common law doctrine used in the UK in cases of avoidance of tax, whereby certain transactions are ignored for fiscal purposes. Cf. Substance over form doctrine. FISCAL POLICY160 -- Part of economic policy which relates to taxation and public expenditure. FISCAL RESIDENCE160 -- See: Residence FISCAL TRANSPARENCY160 -- Looking through an entity and attributing profits and losses directly to the entitys members. The profits of certain forms of enterprises are taxed in the hands of the members rather than at the level of the enterprise. Often occurs in the case of a partnership for example. FISCAL YEAR160 -- Any 12-month period which is set for accounting purpose of an enterprise. FIXED ASSETS160 -- Assets that are held by an enterprise either continuously or for a comparatively long period of time, generally more than one year FIXED BASE160 -- This term was used in the OECD and UN model tax treaties in the context of independent personal services, but the former Article 14 has been removed from the OECD Model and these issues are now generally dealt with under Article 7, dealing with business profits attributed to permanent establishments. It denotes a centre of activity of a fixed or permanent character from which such services can be carried out such as a physicians consulting room. The fixed base provision attributes the right to tax income from independent personal services to the other country (i. e. the source country) if the taxpayer has a fixed base available to him in that country and income is attributable to that fixed base. FIXED INCOME160 -- Income which does not fluctuate over a period of time, such as interest on bonds and debentures, or dividends from preference shares as opposed to dividend income from ordinary shares. FLAG OF CONVENIENCE160 -- The flag of ship is the flag of the country where it is registered. This term is used in international shipping where a ships country of registration is selected on the basis of countrys legal requirement and tax regime. FLAT TAX160 -- A tax applied at the same rate to all levels of income. It is often discussed as an alternative to the progressive tax. FLOORS160 -- The lower limits on tax benefits and detriments, e. g. in medical expense. A taxpayer must spend more than the floor for a deduction, and only the amount above the floor is deductible. FLOW-THROUGH ENTITY160 -- See Fiscal transparency FOB VALUE160 -- FOB denotes free on board. FOB value is value of goods excluding carriage, insurance and freight, i. e. roughly speaking, the domestic price in the country of origin. FORCE OF ATTRACTION160 -- Concept under which a permanent establishment is taxed by the country in which it is located not only on the income and property, but also on all income derived by its foreign head office from source in, and all property owned by the foreign head office situated in, the country where the permanent establishment is located. The OECD model treaty does not allow application of it. FOREIGN CURRENCY FORWARD160 -- See Forward contract.160 This contract serves the same purpose as a foreign currency futures contract, except that it is not standardized and entered on the informal, interbank market rather than on a formalized commodities exchange. FOREIGN CURRENCY FUTURES160 -- Exchange traded contract for the delivery of a standardized amount of foreign currency on a specific future date. The price for the foreign currency is agreed on the day the contract is bought or sold. Unlike forward contracts, futures are tradable, reflecting the standardization of contract size, specification and delivery date. FOREIGN CURRENCY OPTION160 -- Contract with an option to buysell foreign currency.160 See: option. FOREIGN CURRENCY SWAP160 -- An agreement under which two or more parties agree to exchange specified amount of two different currencies for a defined period. Over the term of the agreement, the parties exchange fixed or floating rate interest payments in their swapped currencies. FOREIGN EXCHANGE CONTROL160 -- See: Exchange control FOREIGN EXCHANGE TAX160 -- Special tax imposed on transactions involving sales of foreign exchange by domestic banking institutions and authorized exchange brokers. FOREIGN-SOURCE INCOME160 -- Generally income realized from countries outside the country of residence of the taxpayer. FOREIGN TAX CREDIT (FTC)160 -- See: Credit, foreign tax FOREIGN TAX RELIEF160 -- Relief from domestic tax on income from abroad which has already suffered foreign tax. Generally speaking, two approaches are taken to foreign tax relief, i. e. the credit method or the exemption method. FORFAIT160 -- In a number of countries tax is sometimes levied on an estimated taxable base (forfait), particularly in respect of the imposition of income tax or turnover tax on small enterprises. FORMS, TAX160 -- See: Tax form FORMULA APPORTIONMENT160 -- See: Unitary tax system FORMULATORY APPROACH160 -- See: Unitary tax system FORWARD CONTRACT160 -- Contract for the delivery of an amount of asset (e. g. foreign currency, securities, commodities) on a specific future date. FRANCHISE TAXES160 -- Nearly all states in the US levy an annual franchise tax on resident and non-resident corporations for the privilege of the right to do business in that state. FRAUD160 -- Tax fraud is a form of deliberate evasion of tax which is generally punishable under criminal law. The term includes situations in which deliberately false statements are submitted, fake documents are produced, etc. FRINGE BENEFITS160 -- Benefits supplementing normal wages or salaries. Fringe benefits may be given in the form of a money allowance, e. g. a holiday bonus or in the form of benefits in kind, e. g. free accommodation. Although most countries tax the benefit of employer-provided automobiles and accommodation, the tax treatment of other fringe benefits varies considerably. FRIVOLOUS POSITION160 -- A tax position that is knowingly advanced in bad faith and is patently improper. FRONTIER WORKERS160 -- For tax purposes, a frontier worker is a person who commutes across a border (e. g. on a daily basis) between his place of residence and his place of employment. FRONTING160 -- Term used to describe the practice of interposing a third party in a transaction so as to circumvent transfer pricing legislation. FRUIT AND TREE DOCTRINE160 -- A judicial doctrine that an individual who earns income from property of services may not assign such income to another person for tax purposes. FTC160 -- See Foreign tax credit FUNCTIONAL ANALYSIS160 -- An analysis of the functions performed (taking into account assets used and risks assumed) by associated enterprises in controlled transactions and by independent enterprises in comparable uncontrolled transactions. FURNISS V. DAWSON160 -- This case is 1984 UK case, decided by the House of Lords, which is generally considered to be a landmark case. It made ineffective tax avoidance schemes which have no commercial purpose other than the avoidance of tax. FUTURES CONTRACT160 -- An agreement between a buyer and seller to exchange particular goods (e. g. securities or commodities) for a particular price at a future date as specified in a standardized contract common to all participants in a market on an organized futures exchange. GAAP160 -- Generally Accepted Accounting Principles are the rules and practices required to be followed in keeping financial records and books of account. GAIN, CAPITAL160 -- See: Capital gain GEARING160 -- Term broadly used in the context of a companys debtequity ratio. A company is highly geared if the ratio of debt to equity is high. Sometimes referred to as capital gearing or leveraging. GENERAL PARTNER160 -- In a partnership, a partner whose liability is not limited. All partners in an ordinary partnership are general partners. A limited partnership must have at least one general partner and at least one limited partner. GENERAL PARTNERSHIP160 -- See: Partnership GENERATION-SKIPPING TAX --160Tax imposed to prevent the avoidance of transfer tax (i. e. estate tax and gift tax) over successive generations. GIFT CAUSA MORTIS160 -- A transfer of property by a person who faces impending death. The donee thereby becomes the owner of the property, but on the condition that the gift is revoked if the donor does not die. GIFT INTER VIVOS160 -- A gratuitous transfer of property made during the transferors (donors) lifetime. In many countries the gratuitous transfer of property is subject to a gift tax. GLOBAL FORMULARY APPORTIONMENT METHOD160 -- See: Global method GLOBAL HEDGING160 -- A risk-management strategy to balance positions of different business units or with unrelated third parties. GLOBAL INCOME TAX --160Income tax that aggregate income from all sources at the individual (or family unit) level. The income is then taxed at a single progressive rate. GLOBAL METHOD160 -- Under the global method, the profits of each member of a multinational enterprise (MNE) are not calculated on the basis of arms length dealings, but rather the total profit of the enterprise is allocated to the members of the multinational enterprise on the basis of, for example, the turnover of each member, the expenses incurred by each member or the labour cost of each member. GLOBAL TRADING160 -- Term used to describe transactions carried out by, inter alia, investment banks and securities dealers, involving financial instruments, financial services and financial goods. Also known as 24-hour trading since the transactions are carried out continuously during a day in financial markets worldwide. GOING CONCERN160 -- A business which is actually operating, e. g. at the time of takeover. The advantage of taking over a business as a going concern (if it is operating profitably) is usually recognized by a payment for goodwill as well as for other assets. GOING CONCERN VALUE160 -- The element of value that attaches to property as a result of the ability of a trade or business to continue to operate and generate income after a transfer of ownership. GOOD FAITH160 -- Good faith denotes a state of mind, whereby a person honestly and truly believes that certain facts or circumstances are as he says they are. GOODS AND SALES TAX160VAT -- style multi-stage sales tax levied on purchases (and lessees). Sellers (and lessors) are generally responsible for collection.160 GOODWILL160 -- Intangible asset which consists of the value of the earning capacity, location, marketing organization, reputation, clientele, etc. of a trade or business. Goodwill can be transferred for a consideration to another entrepreneur upon the sale of the business as a going concern. GORDON REPORT160 -- 1981 report submitted to the US Treasury, entitled Tax Havens and Their Use by United States Taxpayers - An Overview it explains the use of US taxpayers make of tax havens, existing anti-abuse measures and proposals for measures to counter such activities. GRACE PERIOD160 -- The period following the due date of taxes during which legal action for recovery of delinquent taxes will not be instituted and interest will not commence to run. GRADUATED RATE --160System where the rate of tax increases on marginal amounts as the amount of taxable income rises. Synonym for progressive rate. GRANDFATHER CLAUSE160 -- Clause temporarily preserving legislation which exists at the time a law is modified or a (tax) treaty is concluded (or modified). GREEN CARD160 -- Entry document issued by the US immigration and Naturalization Service (INS) that permits foreign nationals to live permanently in the US and undertake employment. GREEN CARD TEST160 -- A test in the US to determine residence of an alien individual, i. e. an alien is considered resident if at any time during the calendar year he is a lawful permanent resident of the US under the immigration laws. GROSS INCOME -- Gross receipts, whether in the form of cash or property, of the taxpayer received as compensation for independent personal services, and the gross receipts of the taxpayer derived from a trade, business or services, including interest, dividends, royalties, rentals, fees or otherwise. GROSS INCOME, TAXES ON160 -- In some countries income taxes are levied on gross income (usually at low rates) without deduction for expenses. GROSS MARGIN160 -- Ratio of gross profits to gross revenue. GROSS PROFITS160 -- The gross profits from a business transaction are the amount computed by deducting from the gross receipts of the transaction the allocable purchases or production costs of sales, with due adjustment for increases or decreases in inventory or stock-in-trade, but without taking account of other expenses. GROSS PROFIT RATIO160 -- Ratio of gross profit to the sales of a business or, alternatively, to the adjusted purchases or goods consumed during the accounting period. GROSS PROFITS TAX160 -- Tax imposed usually at low rates on the gross receipts of a business GROSS UP160 -- Add back the amount of tax which has been paid to the value of property or other income received. The term includes the process by which corporation add credits (e. g. imputation credits or foreign tax credits) received to net income received before calculating their tax liabilities. GROUP SERVICE CENTER160 -- Term used in the 1984 OECD Report on Transfer Pricing and Multinational Enterprises to denote a special department within a parent company or regional holding company or any other associated enterprise within a multinational enterprise (MNE) providing services to associated enterprises. GROUP TREATMENT160 -- Term used to describe the tax treatment where the profits and losses of associated companies may be grouped together and, in effect, be treated as the aggregated profits of a single enterprise (sometimes called a fiscal unity). GUARANTOR160 -- A person who guarantees, endorses, or provides indemnity agreements with respect to debts owed to others. HABITUAL ABODE160 -- In the context of the tie-breaker rule of the OECD model tax treaty, habitual abode is one of the criteria used to resolve the problem of dual residence. It refers to the period of time a taxpayer spends in each country. HARDSHIP CLAUSE160 -- Discretionary power of the tax authorities to mitigate any harsh results of the tax law. HARMONIZATION OF TAX, EEC DIRECTIVE160 -- Term usually used to refer to the process of removing fiscal barriers and discrepancies between the tax systems of the various countries comprising the European Union. To this end the EU has issued directives in the area of indirect and direct taxation. HEAD OFFICE EXPENSES160 -- Where an enterprise with its head office in one country operates through a branch or other permanent establishment in another country, some expenses incurred by the head office, e. g. for general management and administrative expenses or the cost of specific services provided to the permanent establishment, may be deducted in computing the taxable profits of the permanent establishment. HEDGING TRANSACTION160 -- Transaction where a person tries to protect himself against price, interest rate or foreign exchange rate fluctuations, for example, by buying or selling commodities or currencies using derivative contracts such as forwards, futures, options and swaps. HIDDEN RESERVES160 -- Reserves which are not disclosed on the balance sheet of an enterprise, either by overvaluing debts or undervaluing assets. HIDDEN TAX160 -- Indirect tax paid by the consumer without his knowledge. HISTORICAL COST160 -- Amount expended in obtaining an asset at the time of acquisition, i. e. the purchase price and associated costs. HOLDING160160 -- A decision of a court HOLDING COMPANY160 -- Company whose main purpose is to hold substantial shares of other companies. HOLDING PERIOD160 -- The length of time that an investment is owned or expected to be owned. HOMESTEAD160 -- A house and surrounding land owned and used as a dwelling. HORIZONTAL EQUITY160 -- Doctrine which holds that similarly situated taxpayers should receive similar tax treatment, e. g. taxpayers who earn the same amount of income or capital should be accorded equal treatment. HOUSE WAYS AND MEANS COMMITTEE160 -- The committee of the US House of Representatives that introduces most tax provisions. HUT TAX160 -- Type of poll tax levied on inhabited dwellings or huts generally at an early stage in the development of an economy when it is not feasible to introduce an income tax. HYBRID ACCOUNTING METHODS160 -- Term which refers to the situation where a taxpayer used a combination of accounting methods (such as accruals basis accounting or cash basis accounting) for different items of income. HYBRID DERIVATIVE160 -- Financial instrument which has the characteristic of more than one type of instrument, i. e. a swap plus an option. HYBRID ENTITY160 -- Entity that is characterized differently in two or more jurisdictions, for example, an entity that is treated as a partnership in one jurisdiction and as a corporation in another. HYBRID INSTRUMENT160 -- See: Hybrid derivative IMF160 -- See: International Monetary Fund IMMOVABLE PROPERTY160 -- Also known as real property, immovable property comprises land, houses and buildings. IMPORT DUTY160 -- See: Duty IMPOST160 -- The term impost means tax and refers particularly to a duty on imported goods and to clarification (by customs) of (imported) goods in order to assess the proper (import) taxes. IMPUTATION SYSTEM160 -- System under which at least part of the tax paid by a company on its profits is credited against the tax liability of shareholders in receipt of distributions paid by the company out of those profits. IMPUTED INCOME160 -- The economic benefit a taxpayer obtains through performance of self-provided services or through the use of self-owned property. IMPUTED INTEREST160 -- Implied interest. In a mortgage that states an insufficient interest rate, tax law will impute a higher rate and a lower principal, which will increase taxes on the receipt of payment. INBOUND TRANSACTION160 -- Term which refers to the tax treatment of foreigners doing business and investment in other countries. INCENTIVE STOCK OPTION (ISO) --160An equity-type compensation plan under which qualifying stock options are free of tax at the date of grant and the date of exercise but are taxed when sold. US system. INCIDENCE OF TAX160 -- The person who bears the tax burden in economic sense, which could be different from the person paying the tax. INCOME PROPERTY160 -- Often, real estate that is bought for the income it produces. INCOME SHIFTING160 -- Income splitting INCOME SPLITTING160 -- A number of arrangements, the essential feature of which is that income, which would have been taxed at a higher rate in the hands of the person who derived it, is taxed in the hands of another person at a lower rate. INCOME STATEMENT160 -- Statement showing the results of a business operation for a particular period of time. The statement will show the businesss revenues and expenses. INCOME SUBJECT TO TAX160 -- All sources of income liable to tax without taking account of tax allowances. INCOME TAX CREDIT160 -- See: Credit, tax INCORPORATION160 -- The process by which a company receives a government charter allowing it to operate as a corporation. INDEMNIFICATION160 -- Amount of money received by persons or entities as compensation for damages or for losses incurred. INDEPENDENT AGENT160 -- See: Agency INDEPENDENT CONTRACTOR160 -- A contractor who is self-employed. INDEPENDENT ENTERPRISES160 -- Two enterprises are independent enterprises with respect to each other if they are not associated enterprises with respect to each other. INDEPENDENT PERSONAL SERVICES160 -- Services performed by an independent contractor. An independent contractor is hired to do work according to his own methods and is not subject to the control of an employer except as to the result of his work. With the removal of Article 14 from the OECD Model, this issue is now dealt with by Article 7 as business profits in most cases. INDEX-LINKED ADJUSTMENT160 -- Expedient adopted in many commercial transactions to provide a workable solution to some of the problems created by inflation and monetary depreciation. The mechanism is essentially one of adjusting payments, profits, gains, taxable income brackets, tax allowances, etc. by discounting or otherwise modifying them by reference to an accepted index of inflation or other indices. INDEXATION160 -- See: Index-linked adjustment INDIRECT-CHARGE METHOD160 -- A method of charging for intra-group services based upon cost allocation and apportionment methods. INDIRECT COST160 -- Costs that cannot be identified in relation to a particular activity but that, nevertheless, are related to the direct costs (e. g. overhead expenses, costs of supporting departments, and a proper share of research and development (RampD) costs). INDIRECT TAX160 -- Tax imposed on certain transactions, goods or events. Examples include VAT, sales tax, excise duties, stamp duty, services tax, registration duty and transaction tax INDIRECT TAX CREDIT160 -- See: Credit, underlying (indirect) tax INFORMATION RETURN160 -- Declaration made by a person who has economic information about a potential taxpayer, regardless of whether that person is liable for withholding tax. INHERITANCE160 -- Real property or personal property that is received by heirs. IN KIND160 -- Broadly speaking, a distribution or payment other than in money. INPUT TAX160 -- Term used in connection with VAT to denote the tax embodied in purchases made by a trader or entrepreneur who will usually be able to obtain a credit for the tax that his suppliers have paid on the goods supplied to him which form his inputs. INSOLVENCY160 -- Inability to pay debts when due INSTALMENT SALE160 -- Sale for which the consideration is received by way of more than one payment or instalment. INSTRUMENT160 -- A legal document that records an act or agreement and provides the evidence of that act or agreement. Instruments include contracts, notes, and leases (e. g. a debt instrument). INSURANCE PREMIUMS160 -- The amount paid to an insurance company to cover potential hazards. INSURANCE SETTLEMENT160 -- Receipt of proceeds of an insurance policy. INTANGIBLE PROPERTY160 -- Property which has no physical existence but which has a value based on a legal right of the owner, e. g. goodwill, patent, trade mark, copyright, software, inventions, designs, i. e. all manner of intellectual property. Intangible property is usually transferred by way of a licensing agreement, and payments for the intangible are made in the form of royalties. INTEGRATION, FULL -- System which provides for retained as well as distributed profits to be included within the framework of an imputation system. All corporate-source income, whether retained or distributed, is taxed at the appropriate marginal rate in the hands of ultimate shareholders. INTELLECTUAL PROPERTY160 -- Literary, dramatic, musical, artistic and scientific works are intellectual property which is protected by copyright, patent, registered design, trade mark, etc. INTENTIONAL SET-OFF160 -- A benefit provided by one associated enterprise to another associated enterprise within the group that is deliberately balanced to some degree by different benefits received from that enterprise in return. INTER ALIA160 -- Latin for among other things INTERCOMPANY PRICING160 -- See: Transfer pricing INTERCOMPANY TRANSACTIONS160 -- Transactions between members of an affiliated group filing a consolidated return gain or loss is deferred until a property is disposed of outside the group. INTERCORPORATE DIVIDENDS160 -- Dividends distributed between two companies (domestic or foreign) arising from a shareholding or participation in the capital of the paying company. INTERMEDIARY COMPANY160 -- See: Conduit company INTERNAL MARKET160 -- In the context of the European Union, an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured. INTERNAL REVENUE BULLETIN (IRB)160 -- A weekly publication summarizing various IRS administrative rulings. INTERNAL REVENUE CODE (IRC)160 -- Legislation passed by US Congress that specifies what income is to be taxed, how it is to be taxed, and what may be deducted from taxable income. INTERNAL REVENUE MANUAL (IRM)160 -- An official compilation of policies, procedures, instructions, and guidelines for the organization, functions, operation, and administration of the Internal Revenue Service. The IRM guidelines do not confer any rights on taxpayers. INTERNAL REVENUE SERVICE (IRS)160 -- The agency of the US federal government that is responsible for the administration and collection of federal taxes. INTERNATIONAL DOUBLE TAXATION160 -- See: Double taxation, domestic and international INTERNATIONAL MONETARY FUND (IMF) --160An international organization established in 1945, headquartered in Washington, DC. The purposes of the IMF are, inter alia, to promote international monetary cooperation, facilitate the expansion and balance growth of international trade and promote stability in foreign exchange. INTERNATIONAL TAXATION160 -- Traditionally, international taxation refers to treaty provisions relieving international double taxation. In broader terms, in includes domestic legislation covering foreign income of residents (worldwide income) and domestic income of non-residents. INTRA GROUP SERVICES160 -- Services provided by a group company to another affiliated company. The cost of general services such as management, administrative and similar services may be often allocated among the various members of the group without any profit mark-up, whereas services performed in the ordinary course of business are subject to arms length conditions. INVESTMENT160 -- The purchase of stocks, bonds, mutual fund shares, real property, an annuity, collectibles, or other assets, with the expectation of obtaining income or capital gains-or both-in the future. INVESTMENT ALLOWANCE160 -- Allowance with respect to a qualifying depreciable asset. It adds a certain percentage of the assets initial cost to the full depreciation write-off and is usually given in the year of acquisition or as soon as possible thereafter. INVESTMENT COMPANY160 -- Corporation whose activities consist exclusively or substantially of making investments (i. e. holding property and collection of income therefrom) and whose buying and selling of shares, securities, real estates or other investment property is only incidental to this purpose. INVESTMENT DEDUCTION160 -- See: Investment allowance INVESTMENT GOODS160 -- See: Fixed assets INVESTMENT INCENTIVES160 -- Financial and tax incentives used to attract local or foreign investment capital to certain activities or particular areas in a country. INVESTMENT INCOME160 -- Income derived from the investment of capital, whether money or other property, in income-producing assets or in a profit-making venture without active participation in the production of the income or in the affairs of the venture. INVESTMENT METHOD160 -- Method used in connection with VAT where an immediate credit is granted against tax for that part of expenditure incurred during the year for acquisition of business assets (such as plant and machinery by a manufacturer) which related to the tax element in the price of such assets. INVESTMENT RESERVE160 -- This system permits eligible taxpayers to set aside part of their profits as a reserve for future investment and deduct from their income the amount of the annual contribution to the reserve. INVOICE BASIS160 -- Method of applying VAT to the price at which the goods or service are invoiced, with a deduction for the tax (if any) charged at previous stages. INVOICE COMPANY160 -- Term used in the context of transfer pricing to refer to a company established in a low-tax or no-tax jurisdiction for the purpose of shifting profits to that jurisdiction. IRB160 -- See: Internal revenue bulletin IRC160 -- See: Internal revenue code IRM160 -- See: Internal revenue manual IRS160 -- See: Internal revenue service ISSUED SHARE CAPITAL160 -- Shares that have been sold to shareholders by the corporation ITEMIZED DEDUCTIONS160 -- In the US a deduction as specifically set forth in the Internal Revenue Code. The deductions in this part are individually listed, item by item. JEOPARDY ASSESSMENT 160-- Tax assessment made where there is some danger of tax being lost. JOINT RETURN160 -- A single return made jointly by husband and wife. JOINT-STOCK COMPANY160 -- Company with legal personality and whose capital is divided into shares. The shareholders are generally liable only to the extent of the nominal value of their shares. JOINT VENTURE160 -- Term which is loosely used to describe a relationship between parties carrying on an undertaking in common for their individual or common gain. This can be either an incorporated venture or an unincorporated venture. JUNK BOND160 -- Bonds and debentures issued by companies that have a low credit evaluation (i. e. below investment grade) from a rating agency such as Standard amp Poors or Moodys JURIDICAL DOUBLE TAXATION160 -- See: Double taxation, economic and juridical JURISDICTION160 -- The power, right, or authority to interpret and apply tax laws or decisions. - K - KIDDIE TAX160 -- Term used to describe tax levied in the US on the unearned income of a child under 14. The income is taxed at the parents highest rate of tax. KNOW-HOW160 -- All undivulged technical information, whether or not capable of being patented, that is necessary for the industrial reproduction of a product or process, i. e. knowing how a product is made or how a particular process works. Payments for know-how may be taxed as royalties in many cases. The distinction from contracts for the provision of services is addressed in the OECD Commentary to Article 12. LANDED COST160 -- Term used in relation to the importation of goods which means the sum total of the cost of the goods concerned, the amount of customs duties levied on those goods and the expense incurred in unloading them. LAST IN, FIRST OUT160 -- See: LIFO LEASE160 -- In general, a lease is a contract in respect of real or personal property, under which the owner of the property grants to another the right to possess, use and enjoy the property for a specified period of time in exchange for periodic payments. LEASEBACK160 -- See: Sale and leaseback LEGAL ENTITY160 -- Generally, corporations, joint-stock companies and limited liability companies are regarded for tax purposes as having an existence separate from that of their shareholders. Conversely, for tax purposes a partnership is often not regarded as a separate legal entity, its profits being taxed in the hands of the individual partners. What constitutes a legal entity for tax purposes may or may not coincide with what constitutes a legal entity for general law purposes. LEGAL RESERVE 160-- Under the civil law of some countries corporations are required to maintain a legal reserve for all needs which may arise in the course of the business. Tax law does not allow a deduction for such a reserve. LETTER-BOX COMPANY160 -- A paper company, shell company or money box company, i. e. a company which has compiled only with the bare essentials for organization and registration in a particular country. The actual commercial activities are carried out in another country. LETTER RULING160 -- See: Advance ruling LEVEL PLAYING FIELD160 -- This term denotes to reduce, by means of tax policy, the differences in the taxation of internationally mobile entities or transactions allowing countries to compete fairly on non-tax factors. LEVERAGING160 -- See: Gearing LIBOR160 -- The London inter-bank offering rate is the rate at which London money banks lend to each other. LICENSE DUTIES (OR FEE)160 -- Annual duties payable for the privilege of carrying on a certain trade. LICENSING160 -- Licensing is an agreement by which a licensor transfers the right to use his technology andor know-how to a licensee for the production or manufacturing of a product in the licensees country. Royalties are generally paid for the right to use the technology or know-how. LIEN160 -- A charge against property, making it security for the payment of a debt, judgment, mortgage, or taxes. LIFE INTEREST160 -- Assets may be given to a person for his lifetime use or benefit, with the stipulation that after his (the life tenants) life, the asset will pass to another beneficiary. LIFE TENANCY160 -- Under common law an interest in possession whereby the individual beneficiary is entitled to the income of a trust or settlement until his death. LIFO160 -- Method (last in, first out) of valuing inventory or stock-in-trade whereby the goods or materials purchased last are regarded as those which are sold first. LIMITATION ON BENEFITS PROVISION160 -- Tax treaty provisions designed to restrict treaty-shopping opportunities by limiting treaty benefits to persons who meet one of several enumerated tests, which may require minimum level qualifications, e. g. local ownership. LIMITATIONS, STATUTE OF160 -- See: Statute of limitations160 LIMITED LIABILITY160 -- Liability of investor which is limited to the extent of his investment LIMITED LIABILITY COMPANY (LLC)160 -- Business form that combines the flexibility and tax advantages of a partnership with the limited liability features of a joint-stock company. An LLC may be taxed as a partnership or a corporation depending on the nature of the status under which it is organized. LIMITED (SPECIAL) PARTNER160 -- See: Limited partnership LIMITED PARTNERSHIP160 -- Business entity made up of two types of partners: general partners and limited partners, the extent of whose liability depends on their role and contribution to partners. A general partner is involved in the management and day-to-day operation of the partnership and is jointly and severally liable for all obligations of the partnership. A limited partner only makes a financial contribution to the partnership and shares in the profits he is liable for partnership obligations only to the extent of his investment. Limited partners are usually restricted from taking an active part in the management of the business of the partnership or from allowing their name to be used in the conduct of the business. LINK STRUCTURE160 -- Structure operating as a result of the different rules in various countries for determining the place of residence it is a means used by dual resident companies to obtain tax relief in two countries. LIQUIDATION160 -- A company in liquidation is a company in the process of being dissolved or wound up, and its assets, if any, after payment of its debts, distributed to the shareholders. LISTED COMPANY160 -- Company whose shares are traded on a recognized stock exchange. LISTED SECURITIES160 -- See: Quoted securities LLC160 -- See: Limited liability company LOAN CAPITAL160 -- See: Debt capital LOCAL TAX160 -- In countries where there is a central or federal government and separate levels of government at state, provincial, county or city levels, taxes levied at the lower levels of government are commonly referred to as local taxes. LOCATION OF ASSETS160 -- The location of an asset is relevant to the determination of whether it is within a taxing authoritys jurisdiction. Location of immovable property in a country means, in most countries, that the country taxes the income derived therefrom and possibly the value and capital gains realized on alienation, even if the owner is not a resident of that country. LOCATION SAVINGS160 -- Term used in the context of transfer pricing to refer to the savings or benefits such as cheaper production or service costs obtained by siting particular manufacturing operations in an offshore jurisdiction. LONG-TERM CAPITAL GAINS160 -- In countries where capital gains are subject to special tax treatment, a distinction may be made between capital gains realized after a short period of time and capital gains realized after a longer period of time. Long-term capital gains may be taxed at reduced rates. LOOKING THROUGH160 -- Term typically used when disregarding the separate legal identity, for example, a company, in order to charge tax on a shareholder in respect of his share of the company profits. LOOPHOLE160 -- Opportunities available in tax law to minimize a taxpayers tax burdens. LOSSES160 -- The term may broadly be defined as the excess of expenses over revenues for a period, or the excess of the cost of assets over the proceeds when the assets are sold or otherwise disposed of, or abandoned or destroyed. LOSS RELIEF160 -- Most income tax laws provide some form of relief for losses incurred, either by carrying over the loss to offset it against profits in previous years (carry-back) or in future years (carry-forward) or by setting off the loss against other income of the same taxpayer in the year in which the loss was incurred. LOTTERY TAX160 -- Tax on the sale of lots or on the receipt of prizes after the drawing of lots. LUMP-SUM DEDUCTIONS160 -- Deduction, often from income, for the computation of taxable income, which does not reflect the factual situation. LUMP-SUM EXEMPT AMOUNTS160 -- Fixed sum of income, net worth, etc. below which no tax is due. LUMP-SUM RATES160 -- In specific cases, income tax (and other taxes) may be levied at a fixed rate instead of the rates usually applicable. LUMP-SUM TAXATION160 -- The tax laws of some countries allow the tax authorities to levy a fixed amount of taxes on income in certain circumstances which deviates from the normal method of applying a rate to income to ascertain taxes payable. LUXURY TAXES160 -- Indirect ad valorem tax imposed on supplies of specific non-essential and normally expensive commodities that are arbitrarily considered (e. g. toiletries, cosmetics, jewellery, pearls and precious stones and metals, etc.) MAINTENANCE EXPENSES160 -- 1. Expenses incurred by a taxpayer to provide for his family, former spouse or other relatives. 2. Expenses for the upkeep or preservation of a building or equipment. MALPRACTICE160 -- Improper or immoral conduct of a professional in the performance of his duties, done either intentionally or through carelessness or ignorance commonly applied to accountants, tax preparers, and lawyers to denote negligent or unskilful performance of duties where professional skills are obligatory. MANAGEMENT, PLACE OF160 -- See: Place of management MANAGEMENT, PLACE OF EFFECTIVE160 -- See: Place of effective management MANAGEMENT EXPENSES160 -- Generally the expenses of management are deductible in arriving at the taxable profits of an enterprise carrying on a trade. In the case of a group of companies it may be important to decide how far the general expenses of management of the group should be charged out to and recovered from the members of the group. MANAGEMENT FEE160 -- Broadly, a fee or charge imposed for management andor administrative services of a parent company or head office. MANAGEMENT SERVICE160 -- See: Intra-group services MAP160 -- See: Mutual agreement procedure MAP APA160 -- See: BAPA MARGINAL RATE OF TAX160 -- Tax rate applicable to the top slice or bracket of a taxpayers income or other taxable income, where the relevant tax on such items is levied at progressive rates. MARKETABLE SECURITIES160 -- See: Quoted securities MARKETING INTANGIBLE160 -- An intangible that is concerned with marketing activities, which aids in the commercial exploitation of a product or service andor has an important promotional value for the product concerned. MARK TO MARKET160 -- Tax andor accounting convention under which the value of assetsliabilities is adjusted to reflect fair market value of a specific date. MARK-UP160 -- An increase in the price of something, especially from the price a trader pays for something to the price he sells it for. In the context of transfer pricing, one method to estimate an arms length price for transactions between affiliated companies is to increase the suppliers cost by an appropriate profit mark-up (Cost-plus method). MEMORANDUM OF UNDERSTANDING (MOU)160 -- In the context of a tax treaty, a document exchanged between the treaty partners which sets out the understanding of the parties regarding the convention. Usually this does not have treaty status, but the status depends on the document itself. MERGER160 -- Term generally used to describe a number of operations involving the reorganization of companies. MINERAL ROYALTIES160 -- Regular payments, usually based on the volume or price of minerals extracted, made by mining enterprises to national states or other owners of mineral resources as consideration for the right to exploit particular mineral resources. MINIMUM TAX160 -- In certain countries corporations are always liable to a certain amount of annual tax, regardless of whether they have realized a profit. MINISTRY OF FINANCE (MOF)160 -- Department of government generally responsible for formulating monetary policy, implementing the tax laws, collecting revenue, etc. MIXER COMPANY160 -- Term used to designate an intermediate holding company the purpose of which is to mix income from various foreign sources in order to maximize the benefit of foreign tax credits. The mixer company receives income both from countries with a higher tax rate than that of the destination country and from countries with a lower tax rate, which it then pays out as a dividend. This structure has the effect of averaging out the rate of foreign tax paid. MNC160 -- Abbreviation for multinational corporation MNE160 -- Abbreviation for multinational enterprises MODEL TAX CONVENTIONS (TREATIES)160 -- A model tax treaty is designed to streamline and achieve uniformity in the allocation of taxing right between countries in cross-border situations. Model tax treaties developed by OECD and UN are widely used and a number of countries have their own model treaties. MORTGAGE160 -- A written instrument that creates a lien upon real estate as security for the payment of a specified debt. MORTGAGE TAX160 -- Tax on mortgages usually in the form of a stamp duty levied on the mortgage document. MOTIVE TEST160 -- Test often found in tax rules which are designed to prevent tax avoidance. For example, the rules may provide that certain consequences will follow if the sole, main or principal purpose of certain transaction is the reduction of tax. MOU160 -- See: Memorandum of Understanding MULTINATIONAL ENTERPRISES (MNE)160 -- Company or group of companies with business establishments in two or more countries. MULTIPLE CAPTIVES160 -- Company which has more than one captive insurance company. MULTI-STAGE TAX SYSTEM160 -- Indirect tax charged on the same goods at successive stages of production and distribution. MUTUAL AGREEMENT PROCEDURE (MAP)160 -- A means through which tax administrations consult to resolve disputes regarding the application of double tax conventions.160 This procedure, described and authorized by Article 25 of the OECD Model Tax Convention, can be used to eliminate double taxation that could arise from a transfer pricing adjustment. MUTUAL ASSISTANCE160 -- Mutual assistance in the context of tax treaties is that one of the contracting states will collect taxes due to the other contracting state. See optional Article 27 of the OECD Model. MUTUAL FUND160 -- A type of regulated investment company that raises money from shareholders and invests it in stocks, bonds, options, commodities, or money market securities. Or portfolio of securities held by an investment company on behalf of investors. NATIONALITY PRINCIPLE160 -- The nationality of a taxpayer may affect the manner in which he is taxed and the nature of his tax burden, but comprehensive income tax treaties commonly provide that foreign taxpayers should not suffer discriminatory taxation by reason of their nationality. NEGATIVE INCOME TAX160 -- A proposed system of providing financial aid to poverty-level individuals and families, using the mechanisms already in place to collect income taxes. Low-income person or family would receive a direct subsidy, called a negative income tax. NEGLIGENCE160 -- A lack of due care or failure to do what a reasonable and ordinarily prudent person would do under the given circumstances. NET INCOME160 -- Net income is gross income less deductible income-related expenses. Many countries levy income tax on this basis. NET OPERATING LOSS160 -- Amounts by which business expenses exceed income in a tax year. A traders operating losses constitute broadly the excess of his operating expenditure over receipts from his operations. NET PROFIT160 -- Difference between receipts from business transactions and deductible business expenses, subject to any adjustments for tax purposes. NET PROFIT MARGIN160 -- Ratio of operating profits to gross income (or revenue) NET WEALTH TAX160 -- See: Net worth tax NET WORKING CAPITAL160 -- Current assets less current liabilities. NET WORTH TAX160 -- Many European countries impose the net worth tax in the context of property taxation. The taxable base for resident taxpayers is normally the taxpayers worldwide net worth, i. e. total assets less liabilities along with deductions and exemptions specially allowed by tax laws. NEXUS160Link.160 -- Often a requirement in tax law for determination of taxability or deductibility. For example, expenses are deductible if they have a 8220nexus8221 with gross income.160 In US, the taxable income of a multistate corporation may be apportioned to a specific state only if the corporation has a sufficient nexus in the state. NOMINAL CAPITAL160 -- Amount of capital that is defined as such in the articles of incorporation. Usually, a certain minimum amount of nominal capital is required to establish a legal entity. NOMINAL VALUE160 -- See: Par value NOMINATIVE SECURITIES160 -- See: Registered securities NON-DISCRIMINATION160 -- Tax treaties frequently contain a non-discrimination article which stipulates that citizens or nationals of one country resident in the other country may not be subjected to local taxation which is different from or more burdensome than the tax to which citizens and nationals of the host country are subjected under the same circumstances (including as to residency). NON-QUALIFIED STOCK OPTION160 -- A stock option that does not meet the incentive stock option requirement under US tax law. The spread is taxed as ordinary income. NON-RECOURSE DEBT160 -- A debt for which an individual has no personal liability. For example, a lender may take the property pledged as collateral to satisfy a debt, but has no recourse to other assets of the borrower. NON-RESIDENT160 -- Broadly speaking, a person who spends most of the calendar year outside his country of domicile. Non-residents are usually taxed on income derived from sources within the taxing jurisdiction whereas residents may be taxed on worldwide income. NON-RESIDENT ALIEN160 -- A non-resident individual who is not a citizen or national of the taxing jurisdiction. NOTICE OF ASSESSMENT160 -- The written decision of the tax authorities after a review of a taxpayers return, whereby the amount of taxable income is determined and the amount of tax due is calculated. NOTICE OF DEFICIENCY160 -- See: Deficiency OECD160 -- The OECD (Organization for Economic Co-operation and Development) is a multilateral organization comprised of 30 countries, which are mostly Western European countries and other industrialized countries including US and Japan. Founded in 1961, the OECD provides a forum for representatives of countries to discuss and attempt to coordinate economic and social policies. It has an especially significant role in international tax matters.160 Its website is oecd. org .160 OECD MODEL TAX TREATY160 -- See: Model tax treaty OFFENCE, TAX160 -- Tax offences may be specified in the tax laws covering matters such as late filing, late payment, failure to declare taxable income or transactions, and negligent or fraudulent misstatements in tax declarations. OFFICE160 -- For purpose of the application of a tax treaty, the office of an enterprise normally forms a permanent establishment if the business of that enterprise is wholly or partly carried on through that office. OFFICE AUDIT160 -- An examination at a tax authority8217s office, generally of an uncomplicated tax matter. OFFSHORE BANK160 -- Offshore banking business basically consists of borrowing in foreign currencies for non-resident depositors outside the country and relending the foreign currencies to other non-residents. A number of countries have special regime for the taxation of offshore banks. OFFSHORE COMPANY160 -- Term usually applied to a company registered in a country (often a tax haven) other than the country or countries in which it carries on its business activities. An offshore (or non-resident owned) company is commonly used for captive insurance, marketing abroad, international shipping and tax shelter schemes. OID160 -- See: Original issue discount OMBUDSMAN160 -- A member of the US IRS Commissioners immediate staff who directs the IRSs Problem Resolution Program 8220ON CALL8221 SERVICES160 -- Services provided by a parent company or a group service centre, which are available at any time for members of an MNE group. ONE HUNDRED AND EIGHTY-THREE (183) DAYS RULE160 -- Presence in a country for 183 days or more in any 12-month period may have tax consequences, particularly in respect of an individuals residence for tax purposes or for the taxation of employment income (although other tests must also be met). ONSHORE COMPANY160 -- Term sometimes used to denote the converse of offshore company. ONUS OF PROOF160 -- The burden and responsibility of proving an assertion.160 Widely adopted principle in tax law, for example, where the taxpayer has the basic responsibility of declaring his taxable income or transactions. OPERATING LEASE160 -- Lease where the lessor is regarded as the owner of the leased asset for tax purposes. Cf. Finance Lease OPTION160 -- Derivative financial instrument consisting of a firm agreement granting one party the right but not the obligation to buy or sell commodities, securities or currencies at a specified future date at a specified price. OPTION TO BE TAXED160 -- In the VAT context, a VAT exempt entrepreneur sometimes can claim to be subject to VAT, the advantage being that to be entitled to his input tax against his output tax. ORDINARY SHARES160 -- Ordinary shares (also known as common stock) are generally shares with an equal par value and bear equal rights and obligations such as the right to participate in the management of the company by voting at the shareholders meeting and the right to receive dividends. The rights of ordinary shareholders to receive dividends are generally subordinate to the rights of bond holders and preference shareholders. ORIGINAL ISSUE DISCOUNT (OID) 160-- A discount from par value at the time a bond is issued. The most extreme version of an OID is a zero-coupon bond, which is originally sold far below par value and pays no interest until it matures. ORIGIN PRINCIPLE160 -- Principle under a VAT regime where goods are taxed in the country where they are produced, i. e. they are taxed on the basis of their place of production or origin. OTHER INCOME -- Income not otherwise mentioned in a tax treaty is frequently dealt with in a separate article, entitled other income. OUTBOUND TRANSACTION160 -- Term which refers to the tax treatment of a countrys residents (and perhaps citizens) doing business and investing abroad. OUTPUT TAX160 -- Term used in connection with VAT to denote the tax payable on the sales of goods or services by those who are subject to the tax and in contrast to the input tax for which a credit will be available. OVERHEAD EXPENSES160 -- The general expenses of a business as opposed to the direct cost of producing a good or service. Overhead costs is a term which may, in tax matters, also be used for costs incurred by the head office of a concern for the benefit of branches or subsidiaries. OVERSEAS160 -- In the United Kingdom the term overseas is generally used instead of foreign because foreign cannot be applied to commonwealth countries or to territories which are British possessions, such as the British Virgin Islands, the Isle of Man and the Channel Islands. PAID-IN CAPITAL160 -- The capital received by a corporation from investors for stock, as distinguished from capital generated by earnings or donated. PAPER160 COMPANY160 -- See: Letter-box company PARENT COMPANY160 -- Company with a substantial participation in the share capital of another company, called the subsidiary. PARTICIPATION EXEMPTION160 -- See: Affiliation privilege PARTNER160 --160A member of partnership PARTNERSHIP160 -- Association of two or more person (individuals or companies) formed for the purpose of making a profit. A partnership can be a general partnership or a limited partnership depending on the extent of each partys liability. A general partnership is characterized by the unlimited liability of the general partners for partnership debts. Also see: Limited partnership. Some countries treat a partnership as a separate taxpayer and may subject it to tax on its income and losses as a corporation. Other countries do not consider a partnership to be a separate legal entity and the partnership is treated as tax transparent, with each individual partner being taxed on his share of the profits according to his interest in the partnership. Taxation of partnerships is addressed in the Commentary to Article 1 of the OECD Model. PAR VALUE160 -- Assigned value printed on a share certificate. Face value. PASSIVE INCOME160 -- Income in respect of which, broadly speaking, the recipient does not participate in the business activity giving rise to the income, e. g. dividends, interest, rental income, royalties, etc. PASS-THROUGH ENTITY160 -- A nontaxable entity such as a partnership. Generally, the income or expense is passed to the underlying owner. PATENT160 -- Form of intellectual property. The inventor of a new article or process usually registers his invention with a government department which confers on him the sole right (known as a patent right) to use the invention for a limited period of time. PATRON160160 -- A person who does business with a cooperative, but is not necessarily a member. PATRONAGE DIVIDEND -- A payment to a patron of a cooperative. PAYROLL TAX160 -- Tax charged on an employers payroll (i. e. gross salaries, wages and other remunerations) paid to his employee without regard to their domicile, family status or other individual circumstances. PE160 -- See: Permanent establishment PENALTIES160 -- Administrative penalties are imposed for tax offences, such as failure to make a timely return or payment, negligence, and making a false return or statement. They take the form of additions to the tax and are assessed as part of the tax. Criminal penalties, on the other hand, are enforceable only by prosecution. A prison sentence may be imposed for serious tax fraud. PER CAPITA160 -- Latin for for each person PER DIEM160 -- Latin for by the day referring to daily allowance, usually for travel, entertainment, employee compensation, or miscellaneous out-of pocket expenses incurred while conducting a business transaction. PERMANENT ESTABLISHMENT (PE)160 -- Term used in double taxation agreement (although it may also be used in national tax legislation) to refer to a situation where a non-resident entrepreneur is taxable in a country that is, an enterprise in one country will not be liable to the income tax of the other country unless it has a permanent establishment thorough which it conducts business in that other country. Even if it has a PE, the income to be taxed will only be to the extent that it is 8216attributable8217 to the PE. PERSONAL ALLOWANCES160 -- Personal allowances are granted to individuals as deductions from income in computing their taxable income. There is usually a deduction for the individual himself, spouse, children and other dependents. PERSONAL HOLDING COMPANY160 -- Company, the shares of which are principally owned by or attributed to the taxpayer, and which is set up to receive his investment income. PERSONAL PROPERTY160 -- Things movable, as distinguished from real property or things attached to the realty also called 8220personalty8221. PERSONAL SERVICE CORPORATION160 -- A corporation the principal activity of which is the performance of personal services for example, a management consulting company which sends its personnel to prepare a report on a client company. PETITION160 -- A written application addressed to a court or judge, and stating facts and circumstances relied upon as a cause for judicial action. PHANTOM STOCK PLAN160 -- A deferred-compensation plan that uses the employers stock in the business as a measuring rod for determining the value of the compensation payment. Hypothetical shares of stock are allocated to the employee, and accrued appreciation andor dividends to the hypothetical shares are paid in cash to the employee. PIERCING THE CORPORATE VEIL160 -- The process of imposing liability for corporate activity, in disregard of the corporate entity, on a person or entity other than the offending corporation itself a US legal doctrine. PLACE OF EFFECTIVE MANAGEMENT160 -- Place of effective management is the test suggested in the tie-breaker rule of the OECD model tax treaty to determine the residence of a company where under the domestic laws of both contracting states the company is resident in both of them. The test determines that in such cases the company would, for treaty purposes, be resident in the state in which its place of effective management is situated. PLACE OF MANAGEMENT160 -- For purposes of the application of a tax treaty, the place of management of an enterprise normally forms a permanent establishment. The term place of management as such is not defined in the OECD model tax treaty, but may be defined in national tax law. POOL BASIS160 -- Collective basis for the purpose of depreciation of business assets falling within the same category. For example, all depreciable assets of a similar kind are effectively treated as a single asset for depreciation purposes. PORTFOLIO INTEREST160 -- Category of interest that may be paid from US sources free of withholding tax provided certain requirements are met. The portfolio interest exemption does not apply to bank loans made in the ordinary course of business. PORTFOLIO INVESTMENT160 -- A portfolio investment in a company would be a holding of shares amounting to a small portion of the total shares of the company, e. g. less than 10. Portfolio investors may receive different tax relief or other treatment in respect of their dividends under tax treaties from those accorded to other direct investors. POSSESSIONS OF U. S.160 -- In general, any US island, cay or reef that is not part of any of the 50 states. For tax purposes, possessions include Puerto Rico, the Virgin Islands, the Marshall Islands, the Federated States of Micronesia, American Samoa, Guam, the Canal Zone, Mariana Islands, Johnson Island, and Wake Island. POWER OF ATTORNEY160 -- Instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal. PRECEDENT160 -- The doctrine of precedent in Anglo-American legal system obliges courts to adhere to principles enunciated in previously decided cases when making adjudications in cases involving the same material facts and legal issues. PREFERENCE SHARES160 -- Shares which carry a right to a prior and usually fixed dividend, ahead of dividends paid to ordinary shareholders. PREFERRED STOCK160 -- See: Preference shares PREMIUM160 -- In the context of a derivative financial instrument, a premium is the amount a purchaser pays for an option. In the context of a bond or other debt instrument, it is the amount paid in excess of the face amount. PREMIUM AT THE ISSUE OF SHARES160 -- Excess of issue value over par value in issuing corporate shares. It is a contribution to capital and not taxed as profits. PREPARATORY ACTIVITIES160 -- See: Auxiliary activities PRESUMPTIVE TAXATION160 -- Concept of taxation according to which income tax is based on average income instead of actual income. PRE-TAX PROFITS160 -- Profit after deducting depreciation, costs, etc. but before deducting taxes. PRICE INCREASE RESERVE160 -- Reserve to take account of expected increase in prices of goods, raw materials, etc. which must be replaced in the course of business. PRIMARY ADJUSTMENT160 -- An adjustment that a tax administration in a first jurisdiction makes to a companys taxable profits as a result of applying the arms length principle to transactions involving an associated enterprise in a second tax jurisdiction. PRINCIPAL AMOUNT160 -- The face value of an obligation, such as a bond or a loan, which must be repaid at maturity, as separate from the interest. PRINCIPAL PLACE OF BUSINESS160 -- The place where a person does business most of time. PRIVATE RULING160 -- Ruling granted by the tax authorities to a single taxpayer, usually with respect to a single transaction or series of transactions. Normally the ruling can be relied upon only by the taxpayer to whom it is issued, not by other taxpayers, and is binding upon the tax authority provided all relevant facts have been disclosed. PRIVILEGED TAX REGIME160 -- Euphemism for the tax regime of a tax haven. PRIVILEGE (DIPLOMATIC)160 -- Under the general rules of international law or under the provisions of special agreements, diplomatic agents and consular officers are in most cases exempt from tax in the state to which they are seconded. Many tax treaties include a clause that the right to tax income arising from outside the state is reserved to the sending state. PROFESSIONAL SERVICES160 -- Services independently performed by members of the liberal professions (i. e. physicians, lawyers, accountants, etc.) and other activities of an independent character. PROFIT -- Broadly, the excess of revenue over expenditure. PROFIT AND LOSS STATEMENT160 -- Income statement PROFIT MARK-UP160 -- Method to find an arms length price, by taking the vendors cost and adding an appropriate profit mark-up. PROFIT METHOD160 -- Method used in transfer pricing cases that looks at the profits arising from controlled transactions of one or more of the associated enterprises participating in such transactions. PROFIT RATIO160 -- Term used to denote the ratio of profits of an enterprise to its capital or net worth, and sometimes used as a basis for taxation. PROFIT SHIFTING --160Allocation of income and expenses between related corporations or branches of the same legal entity (e. g. by using transfer pricing) in order to reduce the overall tax liability of the group or corporation. PROFIT SPLIT METHOD160 -- Transfer pricing method that allocates the combined operating income or loss from a transaction among the separate parties by determining the relative value of each partys contribution to such overall profits or loss. PROFITS TAX160 -- Tax imposed on business profits in addition to ordinary income tax or as distinct from income tax imposed on other forms of income. PROGRESSION160 -- The rates of individual income tax are usually progressive, i. e. an increasing proportion of income must be paid in tax as the income increases. PROPERTY TAX160 -- Group of taxes imposed on property owned by individuals and businesses based on the assessed value of each property. PROPRIETORSHIP160 -- An unincorporated business owned by a single person. The individual proprietor has the right to all the profits from the business and also the responsibility for all its liabilities. PRO RATA160160 -- Latin for proportionally PRO RATA RULE160 -- Under most VAT systems, a credit for part of the input tax is allowed for VAT previously paid on goods and services when they are used in taxable and exempt (without credit) transactions and total transactions occurring during a calendar year. PROTOCOL160 -- Signed document containing the points on which agreement has been reached by the negotiating parties preliminary to a final treaty. For tax purposes, a protocol is signed and ratified by the parties in addition to an existing tax treaty. The protocol may be signed simultaneously with the tax treaty or later, and it clarifies, implements or modifies treaty provisions. PROVISIONAL ASSESSMENT160 -- Assessment of tax made before it is possible to make a final assessment which is often based on, for example, estimated figure or the previous years figures. PUBLICLY HELD CORPORATION --160A corporation that has a class of common stock registered on a national stock exchange a US concept. PUBLICLY TRADED LIMITED PARTNERSHIP (PTLP)160 -- Partnership in the US that is listed and traded on an established stock exchange or a secondary market. With some exceptions, PTLPs are taxed in the US as corporations rather than partnerships. PUT OPTION160 -- Contract under which the holder of the option has a right but not an obligation to sell securities or commodities, including foreign currencies, for a specified price during a specified period. - Q - QUARANTINING160 -- In the context of the foreign tax credit system, this term denotes the separate calculation of the foreign tax payable on all foreign income of a particular category which may be credited against the domestic tax payable on that category of foreign income. QUOTED SECURITIES160 -- This term denotes the securities which have been admitted to an official stock exchange and are traded therein through sale, purchase or other disposal. RAMSAY CASE160 -- The Ramsay case (W. I. Ramsay Ltd. v. IRC, Eilbeck (Inspector of Taxes) v. Rawling), decided by the UK House of Lords in 1981, involved complicated tax avoidance scheme which were marketed in the UK in the 1970s. The case established that a series of transactions with the purpose of tax avoidance, which ultimately cancelled each other out, could be ignored for tax purposes. RATES160 -- Local tax levied in Ireland and previously the UK. Rates are levied on the occupiers of real property on the basis of the annual rental value of the property. RATIFICATION160 -- The formal legislative consent or acceptance required by the constitution or domestic law of a country before a treaty to which it is a party can come into effect. REALIZATION160 -- A legal concept referring to a time when rights have become legally receivable or obligations have become legally payable.160 REALIZED GAINLOSS160 -- Actual gainloss realized from the disposal of an asset. REAL PROPERTY (REAL ESTATE)160 -- Land and everything more or less attached to it. Also referred to as 8220Realty8221. REBATE160 -- Term which in certain countries is synonymous with a tax credit. RECIPROCITY PRINCIPLE160 The principle of give-and-take operates in a variety of tax contexts (particularly in the case of tax treaties) where an exchange of tax privileges between countries is desired. Reciprocity is a basis for relieving a taxpayer under domestic law, e. g. relief is granted for foreign tax if the other country gives corresponding or equivalent relief. RECOURSE160 -- The ability of a lender to claim money from a borrower in default, in addition to the property pledged as collateral. RECOVERY OF TAX160 -- From the taxpayers point of view, this may mean a refund of tax. From the tax authorities8217 point of view, it may mean the collection of tax which is in arrears. REDEMPTION160 -- The acquisition by a corporation of its own stock in exchange for property, without regard to whether the redeemed stock is cancelled, retired, or held as treasury stock. REDUCED RATES160 -- In many countries the ordinary rates of tax charged under various tax laws may be reduced in particular situations. For example, under tax treaties, reduced withholding tax rates often apply to dividends, interest and royalties. REFUND (OF TAX)160 -- Tax repaid to a taxpayer REGISTERED SECURITY160 -- A nominative (or registered) security is a security in respect of which the owners name is recorded in a register by the issuing company and the registered owner is the person entitled to all relevant rights. REGISTRATION DUTY160 -- Fixed or variable duty levied on documents which relate to the transfer of ownership or the right to use movable or immovable property, the formation or any change of status of a company, etc. REGULATED INVESTMENT COMPANY (RIC)160 -- Company, also known as a mutual fund, formed under US law to make diversified investment with funds provided by investors who receive dividends and capital gains realized by RIC. REIMBURSEMENT160 -- The payment of an employee or another party for incurred expenses or losses. REINSURANCE160Transfer by a primary insurer to another insurer of all or part of any risk it has accepted in a contract of insurance. A number of countries have adopted special regimes to deal with cross-border reinsurance. REMUNERATION160 -- Employment income and fringe benefits received by an employee for services rendered. REPATRIATION160 -- Individuals and legal entities investing their capital in a foreign country in order to derive income from such capital may wish to transfer this capital or income back to their home country, i. e. to repatriate it. Repatriation also takes place when expatriate employees working in a foreign country want to send income to their home country. RESALE PRICE MARGIN160 -- Gross margin measured by reference to the price at which goods purchased from another party are resold to independent enterprises. RESALE PRICE METHOD160 -- Method used in transfer pricing between affiliated companies, under which an arms length price is ascertained by deducting a normal profit margin from the resale price at which a buyer of inventory assets resells these assets to an unrelated party. RESEARCH AND DEVELOPMENT (RampD)160 -- Any systematic or intensive study carried out in the manufacturing and industrial field, the results of which are to be used for the production or improvement of products and processes. RESERVES160 -- Funds made to fulfil future costs or expenditures. There are legal reserves which may be required by company law and may be necessary before dividends are distributed. RESIDENCE160 -- Residence is a basis for the imposition of taxation. Usually a resident taxpayer is taxed on a wider range of income or other taxable items than a non-resident. Residence in a state is a criteria for invoking a tax treaty of that state, and residence for treaty purposes involves considering the domestic law of residence for tax purposes, and then the requirements in Article 4 of the OECD Model, especially in the case of tiebreaker tests in cases of dual residence. RESIDENCE PRINCIPLE OF TAXATION160 -- Principle according to which residents of a country are subject to tax on their worldwide income and non-residents are only subject to tax on domestic-source income. RESIDENT160 -- A person who is liable for tax in a country or state because of domicile, residence, place of management, or other similar criterion. RESIDENT ALIEN160 -- A person is said to be a resident alien of a country if he resides in that country but is a citizen of another country. RESIDUAL ANALYSIS160 -- An analysis used in the profit split method which divides the combined profit from the controlled transactions under examination in two stages.160 In the first stage, each participant is allocated sufficient profit to provide it with a basic return appropriate for the type of transactions in which it is engaged.160 Ordinarily this basic return would be determined by reference to the market returns achieved for similar types of transactions by independent enterprises.160 Thus, the basic return would generally not account for the return that would be generated by any unique and valuable assets possessed by the participants.160 In the second stage, any residual profit (or loss) remaining after the first stage division would be allocated among the parties based on an analysis of the facts and circumstances that might indicate how this residual would have been divided between independent enterprises.160160160 RESTRICTED STOCK PLAN160 -- A stock option plan under whic h the transferred stock option is subject to restrictions regarding transferability and to substantial risk of forfeiture. Restricted stock is includable in the gross income of the employee in the first taxable year in which the rights become transferable or no longer subject to forfeiture. RETAIL SALES TAX160 -- Single-stage tax on the sale of goods to ultimate consumers, whether by retailers or other traders. RETAINED EARNINGS160 -- The portion of a corporations after-tax profits that is not distributed to the shareholders, but rather is reinvested in the business. RETROACTIVE EFFECT160 -- The effect of tax law provision towards the past, which is allowed only to the advantage of a taxpayer. RETURN160 -- Declaration of income, sales and other details made by or on behalf of the taxpayer. Forms are often provided by the tax authorities for this purpose. RETURN OF CAPITAL160 -- A distribution that is not paid out of the earnings and profits of a corporation. Rather, it is a return of the shareholders investment in the stock of the company. REVENUE NEUTRALITY160 -- Constraints on tax reform that it should not change revenues available to government in any significant way. REVENUE PROCEDURE160(REV. PROC.)160 -- An official published statement by the IRS of US about procedural and administration aspects of the tax laws. RING FENCE160 -- Theoretical enclosure established by tax legislation around certain profits, losses, transactions or groups of transactions in order to isolate them for tax purposes. ROLLOVER RELIEF160 -- Relief by means of which liability to capital gains tax is deferred. The essential feature of roll-over relief is that a gain which would otherwise have arisen on the occurrence of a taxable event for capital gains tax purposes is deferred, or rolled over, until there is a subsequent160 disposal of the asset concerned. ROUND TRIP TRANSACTION160 -- Potential transfer pricing abuse where intangible property is developed by a parent company which licenses it to a related party manufacturer located in a low-tax jurisdiction. The manufactured goods are resold to the parent for distribution to ultimate consumers. ROYALTIES160 -- Payments of any kind received as consideration for the use of, or the right to use intellectual property, such as a copyright, patent, trade mark, design or model, plan, secret formula or process. RULING160 -- Decisions or opinions of the tax authorities in respect of actual fact situations which come before it as part of an assessment procedure or in response to taxpayer questions. SAFE HARBOUR160 -- Where tax authorities give general guidelines on the interpretation of tax laws, these may state that transactions falling within a certain range will be accepted by the tax authorities without further questions. SALE AND LEASEBACK160 -- In a sale and leaseback transaction, the owner of property will sell it to a buyer who then leases it back to the original owner. This method is sometimes used to release the value of capital assets for use in a business. SALES TAX160 -- Tax imposed as a percentage of the price of goods (and sometimes services). The tax is generally paid by the buyer but the seller is responsible for collecting and remitting the tax to the tax authorities. SALVAGE VALUE160 -- Value of tangible depreciable property when it is retired from service. SCHEDULAR TAX SYSTEM160 -- Tax system in which income from different sources is taxed separately (i. e. under a different schedule) thus, separate tax assessments are made on industrial and commercial profits, wages and salaries, income from securities and shares, income from land, etc. S CORPORATION160 -- See: Small business corporation SECONDARY ADJUSTMENT160 -- An adjustment that arises from imposing tax on a secondary transaction. SECONDARY TRANSACTION160 -- A constructive transaction that some countries will assert under their domestic legislation after having proposed a primary adjustment in order to make the actual allocation of profits consistent with the primary adjustment. Secondary transactions may take the form of constructive dividends, constructive equity contributions, or constructive loans. SECOND-TIER SUBSIDIARY160 -- A taxable entity controlled by another taxable entity that is in turn controlled by a third entity. SECRET COMPARABLE160 -- A term used in the transfer pricing context. It denotes a comparable whose data is not disclosed to the public or the taxpayer but known only to the tax authority which is making the transfer pricing adjustment. SECTION 482160 -- The part of the US income tax code that gives the IRS the power to adjust distribute, apportion, or allocate gross income, deductions, credits, or allowances in order to prevent evasion of taxes or to clearly reflect income (often between controlled taxpayers) in short, US transfer pricing rule provision. SECTION 482 WHITE PAPER160 -- Study of intercompany pricing transactions made by the Office of International Tax Counsel at the US Treasury Department which presented a new methodology to govern transactions involving the sale, licensing or transfer of intangible property, published in 1988. SECURITIES160 -- Documents providing evidence of a share in the capital of a company (e. g. share certificate), or the indebtedness of some person to the holder (e. g. government or corporate bonds) or similar legal rights. SELF-ASSESSMENT160 -- System under which the taxpayer is required to declare the basis of his assessment (e. g. taxable income), to submit a calculation of the tax due and, usually, to accompany his calculation with payment of the amount he regards as due. The role of tax authorities is to check (perhaps in random cases) that the taxpayer has correctly disclosed his income. SELF-EMPLOYED160 -- Referring to persons who work for themselves and are not employed by another. The owner-operator of a sole proprietorship or a partner is considered self-employed. SENATE FINANCE COMMITTEE160 -- A committee of the US Senate that hears proposed new tax laws. SEPARATE ASSESSMENT160 -- See: Separate taxation SEPARATE TAXATION160 -- Separate taxation is a method of taxing a married couple on the basis of their joint income. It is mandatory in some countries and optional in others. Upon exercising an option for separate taxation, a husband and wife are treated as separate individuals for the purpose of computing income tax. SERVICE COMPANY160 -- Company within a multinational group of companies which generally provides support services, such as administration, sales information, post-sales service or market research, for the operating divisions of the group. SERVICE FEE160 -- A fee for the rendering of services is generally regarded as income from business activities or, in the case of a liberal profession, as income from independent personal services. SEVERANCE PAYMENTS160 -- Payment made as a result of the termination of any office or employment of a person. SHAM TRANSACTION160 -- A transaction without substance, which will be ignored for tax purposes. SHAREHOLDER ACTIVITY160 -- An activity which is performed by a member of an MNE group (usually the parent company or a regional holding company) solely because of its ownership interest in one or more other group members, i. e. in its capacity as shareholder. SHAREHOLDERS EQUITY160 -- The total assets minus total liabilities of a corporation, also called stockholders equity or net worth. SHARE (STOCK) OPTIONS FOR EMPLOYEES160 -- Some companies grant directors and employees an option to acquire at a future date shares or stock in the company at a predetermined price. It gives an employee the opportunity to benefit from the future success of the company when the market value of the shares increases over the predetermined option acquisition price. SHELL COMPANY160 -- A company set up by fraudulent operators as a front to conceal tax evasion schemes. SHIFTING OF PROFITS160 -- See: Profit shifting SHIFTING AN INCIDENCE OF TAXATION160 -- Determination of the economic entity that actually ends up paying a particular tax. In the case of indirect taxation tax is normally intended to fall upon consumption and be borne by consumers, so that entrepreneur who pays the tax on his supplies of goods and services in general passes on the tax, or shifts it forward to the consumer by adjusting his prices appropriately. Such taxes are said to be shifted backward in the case that entrepreneurs are forced to absorb some of new or increased tax. SHORT-TERM CAPITAL GAINS160 -- Capital gain derived from the disposal of assets which have been held for a comparatively short period of time. SIMULTANEOUS TAX EXAMINATION160 -- A simultaneous tax examination, as defined in Part A of the OECD Model Agreement for the Undertaking of Simultaneous Tax Examinations, means an arrangement between two or more parties to examine simultaneously and independently, each on its own territory, the tax affairs of (a) taxpayer(s) in which they have a common or related interest with a view to exchanging any relevant information which they so obtain. SINGLE ENTITY APPROACH160 -- Method of taxing a legal entity that conducts its business through a permanent establishment rather than through a subsidiary company. Under the single entity approach, a head office and a permanent establishment are treated as one taxpayer for tax purposes, even though they may be considered separate entities for purposes of accounting or commercial law. SINGLE TAXPAYER160 -- A person who is not married on the last day of the tax year. SISTER CORPORATION160 -- See: Brother-sister corporation SITUS RULE160 -- Provision of tax law setting out the factors which determine where a particular asset is situated or deemed to be situated for tax purposes. SIX MONTHS RULE160 -- See: One hundred and eighty-three (183) days rule SMALL BUSINESS CORPORATION160 -- Under US tax law, this term refers to a domestic corporation which does not have more than 35 individual shareholders, all of whom are US citizens or residents and which does not have more than one class of stock. Also known as an S corporation, this form permits income at the corporate level to be taxed only once at the shareholder level. SMALL BUSINESS RELIEF160 -- Term used to denote tax concessions which are available only to or principally to small businesses. SMALL TRADERS, SPECIAL TAX REGIME FOR160 -- In many countries small traders are subject to a special tax regime, particularly in respect of VAT, in which exemption, lower tax burden or lower administrative burden are granted. SOAK-UP TAX160 -- Tax or levy which is conditioned on the availability of a foreign tax credit in another country. SOCIAL SECURITY CONTRIBUTIONS160 -- Charges levied on employees, employers or self-employed or on all persons subject to individual income tax to cover the cost of providing future social security payments. SOLE PROPRIETORSHIP160 -- Ownership of all of the assets of an unincorporated business by a single individual. The individual owner is personally liable for all debts of the business. SOURCE OF INCOME160 -- The place (or country) where a particular item of income is deemed to originate or where it is deemed to be generated. National rules vary, depending on which concept of source is used. SOURCE PRINCIPLE OF TAXATION160 -- Principle for the taxation of international income flows according to which a country consider as taxable income those income arising within its jurisdiction regardless of the residence of the taxpayer, i. e. residents and non-residents are taxed on income derived from the country. SOURCE RULE160 -- Provision in the national law of a country or in a tax treaty which defined the concept of source for a particular type of income. SPECULATIVE GAINS160 -- Gains from the disposal of capital assets which were originally acquired with a view to selling them for more than the cost of acquisition. SPIN-OFF160 -- A type of corporate reorganization by which the shares of a new corporation (or the subsidiary company) are distributed to the original shareholders (or the parents shareholders) without these shareholders surrendering any of their stock in the original (or parent) corporation. SPLIT-OFF 160-- A type of corporate reorganization by which the shares of a new corporation (or the subsidiary company) are distributed to the original shareholders (or the parents shareholders) with these shareholders surrendering part of their stock in the original (or parent) corporation. SPLIT-UP160 -- Under a split-up the shareholders of a parent company surrender all their stock in liquidation of that company and in return receive new shares in corporation which the parent controlled or created immediately before the distribution. SPREAD160 -- Can be used in many contexts to denote the margins on financial transactions.160 For example, the spread of an option is the difference between the fair market value of stock at the exercise date and the option price. STAMP DUTIES160 -- Duty levied upon the issue of official documents such as passports, deeds, contracts for the transfer of ownership, etc. Usually, stamp duties are levied by way of a stamp being fixed to the document in question. Stamp tax STATUTE OF LIMITATIONS160 -- A statute limiting the period within which a specific legal action may be taken, such as the collection of tax, appeal from a decision of the tax authorities or lower court, etc. STOCK160 -- Any shares representing ownership in any corporation or certificates or ownership interest in any corporation. STOCK DIVIDENDS160 -- Dividend distribution by a company to its shareholders in the form of additional shares in the company. STOCK EXCHANGE TURNOVER TAX160 -- Tax levied on the sale of securities on the stock exchange market. STOCK OPTION160 -- (1). The right to purchase or sell a stock at a specified price within a stated period (2). Employee stock option STRIPPED BOND160 -- Bond or debenture from which the interest coupons have been removed and sold separately. SUBPART F160 -- Term which refers to those sections of the US tax code which provide for the taxation of US shareholders of controlled foreign corporations (CFC) in order to prevent the tax-free accumulation of earnings outside the US. SUBPOENA160 -- Latin for under penalty a writ issued under the authority of a court to compel the appearance of a witness or of documents for a tax judicial proceeding. SUBSIDIARY COMPANY160 -- Company effectively controlled by another company (i. e. the parent company). A variety of criteria, including share ownership ratio, may be employed to determine whether one company is a subsidiary of another company for tax purposes. SUBSTANCE OVER FORM DOCTRINE160 -- Doctrine which allows the tax authorities to ignore the legal form of an arrangement and to look to its actual substance in order to prevent artificial structures form being used for tax avoidance purposes. SUBSTANTIAL PRESENCE TEST160 -- Test used to determine residence status based on the number of days, months, etc. of physical presence within a country. SUPER ROYALTY PROVISION160 -- The US Income Tax Reform Act of 1986 provides that royalties for the transfer (by sale, license or otherwise) of intangible property to related foreign companies, which have been determined at the time of the transfer on an arms length basis, may be adjusted in future years by the IRS if they are not commensurate with the income attributable to that intangible. This is called the super royalty provision. SUPPLEMENTAL ASSESSMENT 160-- Determination of tax liabilities at the discretion of the tax authorities if an original assessment is incomplete or incorrect in any material respect. SURCHARGE160 -- Additional amount which is calculated on and added to the normal charge or levy. In other words, the base on which a surcharge is assessed is the normal or basic amount due. Surtax SWAP160 -- Derivative financial instrument in which two parties agree to exchange payments calculated by reference to a notional principal amount. In the classic interest rate swap agreement two parties contract to exchange interest payments based on the same amount of indebtedness of the same maturity and with the same payment dates one party provides fixed interest rate payments in return for variable rate payments from the other party and vice versa. SYNDICATE --160A group of individuals who have formed a joint venture to undertake a project that the participants would be unable or unwilling to pursue alone. TANGIBLE PROPERTY160 -- Property with a physical form, e. g. personal property, real property as distinguished from intangible property. TARIFF160 -- In general the term tariff refers to a list (schedule) or system of levies (taxes, duties, charges) imposed by countries on foreign trade transactions (especially importations). TAX160 -- The OECD working definition of a tax is a compulsory unrequited payment to the government. TAXABLE BASE160 -- The thing or amount on which the tax rate is applied, e. g. corporate income, personal income, real property. TAXABLE EVENT 160-- Term used to define an occurrence which affects the liability of a person to tax. TAXABLE PERIOD160 -- Taxes are levied by reference to a period of time called the taxable period. Tax year TAXABLE YEAR160 -- The period (usually 12 months) during which the tax liability of an individual or entity is calculated. TAX AGENT160 -- Term which refers to a tax adviser who assists the taxpayer in fulfilling his obligations under the legislation. TAX AVOIDANCE160 -- See: Avoidance TAXATION AT SOURCE160 -- See: Withholding tax TAX AUTHORITIES160 -- The body responsible for administering the tax laws of a particular country or regional or local authority. TAX BASE160 -- Taxable base TAX BASIS160 -- Term used in the US to refer to an amount that represents the taxpayers investment in an asset. TAX BILL160 -- Draft law on a tax matter which, after approval by the government of a country, is submitted to the Parliament for debate. TAX BURDEN160 -- For public finance purposes the tax burden, or tax ratio, in a country is computed by taking the total tax payments for a particular fiscal year as a fraction or percentage of the Gross National Product (GNP) or national income for that year. TAX CLEARANCE CERTIFICATE160 -- Document issued to a taxpayer by the tax authorities certifying that the taxpayer has either paid all taxes due or that he is not liable to any taxes. In certain countries a tax clearance certificate must be produced before a person can leave the country. TAX COMPLIANCE160-- Degree to which a taxpayer complies (or fails to comply) with the tax rules of his country, for example by declaring income, filing a return, and paying the tax due in a timely manner. TAX DEPOSIT CERTIFICATE 160-- Certificate available for purchase in US to taxpayers liable to income or corporate tax, etc. Liability to taxes may be paid by cashing in the deposit certificate. Interest is credited on the deposit by the Inland Revenue. TAX CREDIT160 -- See: Credit, tax TAX DECLARATION160 -- See: Return TAX EQUALITY160 -- See: Horizontal equity Vertical equity TAX EVASION160 -- See: Evasion TAX EXILE160 -- Generally speaking, a natural or legal person who severs all ties which make him fiscally resident in a particular country and moves to another jurisdiction for tax reasons. TAX EXPENDITURE160 -- This term denotes special preferences provided in income tax laws which depart from the normal tax structure and which are designed to favour a particular industry, activity or class of taxpayer. TAX FORECLOSURE 160-- The process of enforcing a lien against property for non-payment of delinquent property taxes. TAX FORM 160 -- It is usual to design special forms for taxpayers to declare their taxable income, sales, etc. for tax purposes. Forms are designed to facilitate the task of the tax authorities in assessing and collecting tax, and will usually draw the taxpayers attention to any relief he may claim, etc. as well as to his statutory duty to make accurate declarations and the penalties that may be imposed if his declaration is incomplete or false. TAX-FREE ZONE160 -- Area within the territory of a country in which customs duties and other types of indirect taxes are not applied. TAX HAVEN160 -- Tax haven in the classical sense refers to a country which imposes a low or no tax, and is used by corporations to avoid tax which otherwise would be payable in a high-tax country. According to OECD report, tax havens have the following key characteristics No or only nominal taxes Lack of effective exchange of information Lack of transparency in the operation of the legislative, legal or administrative provisions. TAX HOLIDAY 160-- Fiscal policy measure often found in developing countries. A tax holiday offers a period of exemption from income tax for new industries in order to develop or diversify domestic industries. TAX HOME160 -- A taxpayers regular place of business or post of duty, regardless of where the taxpayer a family home. TAX INFORMATION EXCHANGE AGREEMENT (TIES)160 -- Agreement which allows governments to share tax and other information with a view to combating tax evasion, drug trafficking, etc. TAX LAW, SOURCES OF160 -- The main domestic sources of tax law are primary legislation, such as acts or laws, and secondary legislation such as regulation, decisions, circulars, orders, etc. The main international sources of tax law are bilateral or multilateral treaties, and one important source for the interpretation of treaties is the OECD model tax treaty and the accompanying commentary. Another model is UN model. TAX ON TAX160 -- The charging of tax on tax-inclusive prices. TAXPAYER IDENTIFICATION NUMBER160 -- In some countries taxpayers are given an identification number which must be used when filing a tax return and assessing taxes and for all other correspondence between the taxpayer and the tax authorities. TAX PLANNING160 -- Arrangement of a persons business and or private affairs in order to minimize tax liability. TAX RELIEF160 -- Generic term to describe all methods used to reduce tax liability without regard to the particular way it is accomplished. TAX RETURN 160-- See: Return TAX SECRECY160 -- Obligation usually imposed on tax officials not to reveal particulars about the identity and personal circumstances of taxpayers, or about any of the various aspects governing their tax liability, except in certain strictly limited circumstances. TAX SHELTER160 --160 (1) An opportunity to use, quite legitimately, a relief or exemption from tax to pay less tax than one might otherwise have to pay in respect of similar activities, or the deferment of tax.160 (2) The polite term usually given to a contrived scheme to avoid or reduce a liability to taxation. TAX SPARING CREDIT160 -- Term used to denote a special form of double taxation relief in tax treaties with developing countries. Where a country grants tax incentives to encourage foreign investment and that company is a resident of another country with which a tax treaty has been concluded, the other country may give a credit against its own tax for the tax which the company would have paid if the tax had not been spared (i. e. given up) under the provisions of the tax incentives. TAX THRESHOLD160 -- Level (of income, capital, sales, etc.) at which tax commences to be levied. TAX TREATY160 -- An agreement between two (or more) countries for the avoidance of double taxation. A tax treaty may be titled a Convention, Treaty or Agreement. TAX UNIT160 -- Term used in the context of personal income tax, where taxation may be imposed by reference to separate individuals or to a group of individuals treated as one unit. TEMPORARY IMPORTATION160 -- Many countries allow temporary importation without levying customs duties and turnover tax on items which are to be within their borders for only a short time. TERRTORIALITY PRINCIPLE160 -- Term used to connote the principle of levying tax only within the territorial jurisdiction of a sovereign tax authority or country, which is adopted by some countries. Residents are not taxed on any foreign-source income. THIN CAPITALISATION160 -- A company is said to be thinly capitalised when its equity capital is small in comparison to its debt capital. THIN CORPORATION160 -- A corporation whose capital is supplied primarily by shareholder loans rather than stock investment. THREE-FACTOR APPORTIONMENT FORMULA160 -- A formula used by most US states to apportion total federal business income for out-of-state entities in order to determine the tax due a particular state. The formula equally weights the payroll factor, property factor, and sales factor. TIEA160 -- See: Tax information Exchange Agreement TIEBREAKER RULE160 -- Tax treaty provision designed to prevent an individual from being deemed resident, for purpose of the treaty, in both treaty countries. Generally a multi-step procedure will be provided to resolve the problem of dual residence, usually the place of a permanent home available being the first criterion. TORT160 -- A private and civil wrong or injury, other than breach of contract, for which a court will provide a remedy in the form of an action for damages. TRADE 160-- A business, profession, or occupation. A trade often implies a skilled handicraft, which is pursued on a continuing basis, such as carpentry. TRADE INTANGIBLE160 -- A commercial intangible other than a marketing intangible. TRADEMARK160 -- Legally registered name, word, symbol or design which identifies the goods or services of a particular manufacturer, business or company. TRADE OR BUSINESS160 -- A regular and continuous activity undertaken for a profit, other than that of an investor trading in securities. TRADITIONAL TRANSACTION METHODS160 -- The comparable uncontrolled price method, the resale price method, and the cost plus method. TRANSACTIONAL NET MARGIN METHOD160 -- A transactional profit method that examines the net profit margin relative to an appropriate base (e. g. costs, sales, assets) that a taxpayer realizes from a controlled transaction (or transactions that it is appropriate to aggregate under the principles of OECD TP guideline Chapter I). TRANSACTIONAL PROFIT METHOD160 -- A transfer pricing method that examines the profits that arise from particular controlled transactions of one or more of the associated enterprises participating in those transactions. TRANSACTION TAXES160 -- Tax that uses a specific type of transaction as its object, e. g. sales tax, immovable property transfer tax, etc. TRANSFER PRICING160 -- A transfer price is the price charged by a company for goods, services or intangible property to a subsidiary or other related company. Abusive transfer pricing occurs when income and expenses are improperly allocated for the purpose of reducing taxable income. TRANSFER PRICING ADJUSTMENT160 -- Adjustment made by the tax authorities after making a determination that a transfer price in a controlled transaction between associated enterprises is incorrect or where an allocation of profits fails to conform to the arms length principle. TRANSFER TAX160 -- Tax levied on the transfer of goods and rights, e. g. purchase andor sale of securities and immovable property. TRANSPORTATION TAX160 -- Tax levied on vehicles, ships and aircraft using public highways, rivers, and airports maintained by the government. TREATY ON EUROPEAN UNION (EU)160 -- The treaty on European Union was signed on 7 February 1992 and entered into force on 1 November 1993. This treaty creates a single economic and monetary union (EMU). The main characteristics of this union will be a single currency and a more federal political structure. By virtue of the Union Treaty, the former European Economic Community has been extended with additional goals and powers in order to become a single market in a European Union. The member states of the EU are Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom. On May 2nd 2004, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia newly joined the EU. TREATY OVERRIDE160 -- Term broadly used to refer to the subsequent enactment of legislation which conflicts with prior treaty obligations. As a general rule, the provisions of a tax treaty implemented domestically prevail over other domestic legislation. However, in some countries the relations is governed by the last in time rule. TREATY SHOPPING160 -- An analysis of tax treaty provisions to structure an international transaction or operation so as to take advantage of a particular tax treaty. The term is normally applied to a situation where a person not resident of either the treaty countries establishes an entity in one of the treaty countries in order to obtain treaty benefits. TRUST160 -- A trust is a legal arrangement whereby the owner of property (i. e. settlor) transfers ownership to a person(s) (i. e. trustee) who is to hold and control the property according to the owners instructions, for the benefit of a designated person or persons (i. e. the beneficiaries). Legal title to the trust property is vested in the trustee, while equitable title belongs to the beneficiaries. TRUSTEE160 -- See: Trust TURNKEY CONTRACT160 -- Broadly, a contract to construct a complete project for example, a factory, plant or installation, from the bare site to the stage where the user only need to turn the key to put the project to immediate use. TURNOVER160 -- Volume of business of an enterprise as set forth in the profit and loss account. It is usually measured by reference to the gross receipts, or gross amounts due, from the sale of goods or services, etc. supplied by the entity. TURNOVER TAX160 -- General term used to refer to the different forms of consumption and sales taxes. UNCONTROLLED TRANSACTION160 -- Transaction between independent and unrelated enterprises. UNDER-CAPITALISATION160 -- See: Thin capitalisation UNDERLYING TAX160 -- Tax which is charged on corporate income out of which dividends are paid, but which does not appear as a direct deduction or withholding from the dividend itself. UNDERLYING TAX CREDIT160 -- See: Credit, underlying tax UNDISTRIBUTED PROFITS TAX160 -- Annual tax imposed, in addition to the normal corporate income tax, on the undistributed portion of the profits or surplus of a corporation. UNDUE HARDSHIP160 -- A substantial financial loss that would result to a taxpayer from making payment on the due date of the amount of taxes with respect to which the extension is desired. Undue hardship is a condition precedent to the granting of an extension of time to make a tax payment. UNEARNED INCOME 160-- Term used to describe investment income such as dividends, interest and royalties. UNILATERAL RELIEF160 -- Granting of relief from the effects of international double taxation on the basis of domestic legislation rather than the provisions of a tax treaty. UNIMPROVED PROPERTY160 -- Land that has received no development, construction, or site preparation (i. e. raw land). UNITARY TAX SYSTEM160 -- Under a unitary tax system, the profits of the various branches of an enterprise or the various corporations of a group are calculated as if the entire group is a unity. A formula is used to apportion the net income of the whole group to the various parts of the group. Usually a combination of property, payroll, turnover, capital invested, manufacturing costs, etc. are formula factors. UNLIMITED LIABILITY160 -- Liability of an investor which extends to the full extent of his personal assets, as in the case of a sole proprietor or general partner. UPSTREAM DIVIDEND160 -- Dividends flowing from a subsidiary company to its parent company. USEFUL LIFE160 -- Period during which it is estimated that a depreciable asset will provide useful service to the business in which it is used. USE TAX160 -- Tax on goods which are used within the taxing jurisdiction although the goods were purchased in another jurisdiction VALUATION PRINCIPLES160 -- Tax law principles regarding valuation of business and non-business assets, and inventory. VALUE ADDED TAX (VAT)160 -- Specific type of turnover tax levied at each stage in the production and distribution process. Although VAT ultimately bears on individual consumption of goods or services, liability for VAT is on the supplier of goods or services. VAT normally utilizes a system of tax credits to place the ultimate and real burden of the tax on the final consumer and to relieve the intermediaries of any final tax cost. VENTURE CAPITAL160 -- Form of capital investment for the establishment of a new business or new product development in an existing business, often in exchange for equity. VERTICAL EQUITY160 -- Doctrine which holds that differently situated taxpayers should be treated differently, i. e. taxpayers with more income andor capital should pay more tax. VIENNA CONVENTIONS160 -- There are three multilateral Vienna Conventions which are relevant for taxation purposes. Among them, the Convention of 23 May 1969 on the Law of Treaties is particularly related to the interpretation of tax and other treaties. This convention contains generally accepted rules applying to tax treaties, the conclusion of treaties, their observance, application and interpretation, etc.. There are also Vienna Conventions on Diplomatic and Consular Relations, which address taxation and other issues in that context. VOTING STOCK160 -- Shares in a corporation that entitle the shareholder to voting and proxy rights. WAGE TAX160 Tax -- levied at source as a withholding on wages taxes thus withheld are usually offset against final income tax liability (if any). WEAR AND TEAR160 -- Decline in value through the ordinary use of an asset. Income tax systems usually allow deductions in calculating the profits of a business using buildings, plant and machinery which are subject to wear and tear in the course of the business. WHITE PAPER160 -- Government document announcing government policy and practice on a specific issue or issues. WILL160 -- A legal document that serves as a key vehicle of transfer at death. WINDING UP160 -- The process of liquidating a corporation. WITHDRAWALS160 --When income or goods are withdrawn from a business by the entrepreneur to his private household (without a consideration), the income or the value of such goods normally constitutes a taxable event in the hands of the recipient for income tax purposes. Similarly, a withdrawal of goods or services for private use constitutes a taxable transaction for VAT purposes in most countries using such a system. WITHHOLDING TAX160 -- Tax on income imposed at source, i. e. a third party is charged with the task of deducting the tax from certain kinds of payments and remitting that amount to the government. Withholding taxes are found in practically all tax systems and are widely used in respect of dividends, interest, royalties and similar tax payments. The rates of withholding tax are frequently reduced by tax treaties. WORLD WIDE INCOME160 -- Criterion for the income tax liability of a resident company or individual of a certain country. In many countries a resident company or individual is subject to corporateindividual income tax on its worldwide income, subject to double taxation relief. WORKING CAPITAL160 -- Funds invested in a companys cash, accounts receivable, inventory, and other current assets (gross working capital). The term usually refers to net working capital, that is, current asset minus current liabilities. WRITTEN DOWN VALUE160 -- The value of an asset which is depreciable for income tax purposes, determined by deducting from the total cost, including installation, etc. the deduction that have been made for wear and tear or depreciation in previous tax years. - Z - ZERO COUPON BOND160 -- Long-term bond on which interest is not payable on a regular basis, but rather upon maturity of the bond. It is sold at a deep discount from its face value. ZERO RATE160 -- The term is used in relation to VAT, where the rate of tax which is in principle levied but at a rate of 0 so that in effect no tax is payable, but will result in refunds of input tax credits. Productivity and long term growth OECD Journal: Economic Studies OECD Journal: Economic Studies publishes articles in the area of economic policy analysis, applied economics and statistical analysis, generally with an international or cross-country dimension. To subscribe to this publication please visit OECD iLibrary . Call for papers - If you would like to submit an article for publication in OECD Journal: Economic Studies, please contact Jean-Luc Schneider (jean-luc. schneideroecd. org ) and Catherine Brannigan Conway (catherine. branniganconwayoecd. org). To search by author use the edit --gt find option on the internet toolbar OECD Journal: Economic Studies, Volume 2015 Incorporating anchored inflation expectations in the Phillips curve and in the derivation of OECD measures of the unemployment gap Elena Rusticelli, David Turner, Maria Chiara Cavalleri Does the post-crisis weakness of global trade solely reflect weak demand Patrice Ollivaud, Cyrille Schwellnus Can pro-growth policies lift all boats Orsetta Causa, Alain de Serres, Nicolas Ruiz Effects of economic policies on microeconomic volatility Boris Cournegravede, Paula Garda, Volker Ziemann The dynamics of social expenditures over the cycle Anna Cristina drsquoAddio Experience and the returns to education and skill in OECD countries Stijn Broecke International migration Ben Westmore Trade patterns in the 2060 world economy Jean Chateau, Lionel Fontagneacute, Jean Foureacute, Aringsa Johansson, Eduardo Olaberriacutea Policy challenges for the next 50 years Henrik Braconier, Giusep pe Nicoletti, Ben Westmore OECD Journal: Economic Studies, Volume 2013 Choosing the pace of fiscal consolidation ukasz Rawdanowicz Policy incentives for private innovation and maximising the returns Ben Westmore Technological effects of intra-OECD trade in manufacturing: a panel data analysis over the period 1988-2008 Javad Abedini Demographic or labour market trends: what determines the distribution of household earnings in OECD countries Wen-Hao Chen, Michael Foumlrster, Ana Llena-Nozal Using a quasi-natural experiment to identify the effects of birth-related leave policies on subjective well-being in Europe Anna Cristina DrsquoAddio, Simon Chapple, Andreas Hoherz, Bert Van Landeghem Grade repetition: a comparative study of academic and non-academic consequences Miyako Ikeda, Emma Garciacutea Economic Studies No. 27 (August 1997 ) The paper gives an overview of the interrelation between corporate governance, product market competition and performance across main models of corporate g overnance in OECD countries. The paper argues that managerial incentives, disciplining and corporate finance are not the fundamental distinguishing features of different financial systems. Instead, differences in ownership and control emerge as important influences on the formulation, implementation and adaptation of corporate strategy. Ownership and control structures are interrelated with competition in product markets: concentration of ownership may be required to establish relations between stakeholders and may impede product market competition. This paper surveys the empirical literature on the links between innovation, market structure and firms size. The review shows that there is little evidence in support of the Schumpeterian hypothesis that market power and large firms stimulate innovations. However, positive linkages between concentrationsize and innovative activity can occur when certain conditions are met, including high sunk costs per individual project, economies of scale and scope in the production of innovation rents. Recent empirical work suggests that RGD intensity and market structure are jointly determined by technology, the characteristics of demand, the institutional framework, strategic interaction and chance. Joaquim Oliveira Martins, Stefano Scarpetta and Dirk Pilat This paper presents estimates of mark-ups of prices over marginal costs for 36 manufacturing industries and 7 service sectors in 14 OECD countries. It applies a recently developed methodology, and finds that positive mark-ups are common in both manufacturing and services. The level of the estimated mark-ups can partly be related to competitive conditions by type of market structure. The paper also finds evidence of counter-cyclical behaviour of mark-ups, providing a possible explanation for the pro-cyclicality of employment and real wages. This paper discusses the empirical evidence on cross-country productivity gaps and analyses the link between productivity and competition. It finds that inefficiency and low productivity levels are widespread in both manufacturing and services, and throughout the OECD area. The variation in productivity levels and growth rates appears related to the degree of competition facing industries. International competition is an important element in achieving high productivity levels, but domestic factors also play a role. High entry rates appear conducive to productivity, but high concentration is not. In service sectors, government-imposed regulations are often an important restriction on competition and productivity growth. Maitland MacFarlan and Howard Oxley The main income transfers provided by governments to people of working age are addressed. First, reasons for spending differences over time and across countries in transfer programmes are examined. A general finding is that differences in eligibility and entitlement conditions are usually more important than underlying population and risk characteristics. Moreover, eligibility conditions, reflecting policy goals and programme administration, often appear to be more important than benefit levels in explaining spending patterns. The second part of the paper reflects on these results, giving a brief overview of policy reforms that might allow programme objectives to be reached more efficiently. Economic Studies No. 26 (October 1996) This paper addresses the conflict between poverty reduction and work incentives implicit in the income protection policies of several OECD countries. Alternative approaches to reducing the well-known poverty trap are identified and assessed, including Credit and Negative Income Tax programmes, earnings supplementation, and two marginal employment subsidy plans. It is concluded that a judicious combination of a moderate income guarantee plus programmes to stimulate the supply of and the demand for lower skilled labour could yield gains in a number of dimensions relative to existing income protection arrangements. A stylised blueprint which illustrates such an approach is presented. This paper discusses the role of labour market policy and institutional factors in explaining the differences in structural or equilibrium unemployment across 17 OECD countries. The results suggest that these factors do matter for the level of structural unemployment and for the speed of labour market adjustment after an exogenous shock. In particular, generous unemployment benefit systems and stringent employment protection legislation are associated with high unemployment and a lower speed of adjustment. Greater coordination among social partners in the wage bargaining process as well as both highly centralised and fully decentralised bargaining systems are beneficial to labour market performance. Much prominence has been given to the role of unemployment and related social welfare benefits as a determinant of high and persistent unemployment. Quantifying this effect depends crucially on the ability to measure accurately the so-called replacement rate, the proportion of expected income from work which is replaced by unemployment and related welfare benefits. The OECD has devoted much time and effort recently to gathering comparable data on gross and net replacement rates for most OECD countries. This note aims to describe these data briefly and compare them with similar measures computed by other cross-country studies. Paul Geroski, Paul Gregg and John Van Reenen This paper examines whether imperfect competition in product markets has contributed to unemployment problems in industrial economies. Microeconometric evidence on the origin and extent of product market power and the degree to which these rents are captured by workers is surveyed. Product market imperfections appear widespread and, although large deviations of price from marginal cost appear shortlived, many firms enjoy persistently high returns for long periods. Wages are partially determined by rent sharing but this phenomenon is not solely confined to the union sector. The implication is that reductions in product market imperfections would raise employment. This paper assesses the role of economic fundamentals as causes for devaluationsregime shifts in 12 OECD countries since the late 1970s using a non-linear estimation procedure (probit model). The calculation of probabilities of parity changes indicates that devaluations mainly occurred when economic fundamentals had deteriorated. More recently, exchange rate pressures appear to be triggered by smaller deteriorations in economic fundamentals, as compared with the early 1980s. Prospects of devaluation also appear to be sensitive to changes in key domestic variables, which are traditionally not viewed as direct determinants of equilibrium exchange rates, such as changes in the rate of unemployment. Economic Studies No. 25 (May 1996) Malcolm Edey and Ketil Hviding This paper addresses the issue of whether financial liberalisation has led to improved welfare. The benefits of improved allocation of resources and increased eficiency have to be weighed against the possible effects of deregulation on financial stability. While there is no strong evidence of any trend increase in financial volatility in key markets, there have been a number of episodes of instability apparently linked to financial deregulation. However, the analysis of individual crises suggests that inappropriate macroeconomic policies, deficiencies in prudential policies, and microeconomic distortions affecting incentives in the financial sector, were important contributing factors to the crises. Jens Hoj, Toshiyasu Kato and Dirk Pilat This paper discusses the impact of regulatory reforms and privatisation across the OECD area in enhancing competition in the service sector. After discussing the broad trends in regulation and deregulation, the main focus is on the experience in the distribution, construction, road transport, telecommunication and airline sectors. It appears that countries with a high degree of regulation in these sectors tend to have poorer performance. Moreover, the effects of regulatory reforms - and their design and implementation - depend critically on the character of competition within each sector. The analysis suggests that the deregulation process has induced sizable gains in economic performance. Adrian Orr, Malcolm Edey and Michael Kennedy In this paper a model is presented and estimated that explains real long-term interest rates in terms of developments in low-frequency and high-frequency economic factors in a multi-country framework, for 17 OECD countries since the early-1980s. The results indicate that the low-frequency component of real rates is determined by fundamentals such as the rate of return on business capital, portfolio risk, inflation uncertainty, and indicators of future saving and investment balances. Influences on the high-frequency component include monetary policy actions and shocks to inflation. One major challenge of economic transition in Central and Eastern European countries is to set up the institutional framework without which markets are unable to operate. In most countries, this has implied reviving the bankruptcy legislation inherited from their pre-Communist era. This paper compares the design, operation and outcomes of bankruptcy legislation in Hungary, Poland, the Czech Republic and Russia. It analyses the reasons why these laws have not been effective so far in solving the widespread insolvency of former state-owned companies, and draws some broad guidelines about desirable features of bankruptcy procedures in economic transition. Claude Giorno, Pete Richardson and Wim Suyker This paper analyses the macroeconomic effects of changes in trend factor productivity for the major OECD economies. Medium-term simulations with the OECD INTERLINK model are used to illustrate key uncertainties and sensitivities of adjustment mechanisms to macroeconomic and structural factors. The results suggest that a rise in trend factor productivity leads to higher levels of real income, but the duration of unemployment effects depends crucially on structural factors. If markets are flexible, then the adjustment period may be relatively short-lived, with no permanent effect on the rate of unemployment. Economic Studies No. 24 (October 1995) Howard Oxley and Maitland MacFarlan This paper first assesses the reasons for the substantial increase in health spending as a share of GDP over the past thirty years and then discusses policy options that may help countries to contain expenditures and reach health objectives more effectively. It is argued that much of the increase in spending stems from incentives facing providers of health services rather than from demand-side pressures. Hence, health sector reforms should focus on improving microeconomic aspects of the provision of services. In particular, agencies which fund health care should become more active and selective purchasers of health services. This paper examines the empirical evidence for speed limit and asymmetric effects from the output gap on inflation. The empirical evidence for these effects is not clear-cut across all the major seven OECD economies. Nevertheless, allowing for asymmetric inflation effects does lead to some improvement in fit for a majority of countries. Moreover, such effects are shown to provide a rotionale for the importance which is often attached to timeliness in taking macroeconomic policy actions, and which is athenvise difficult to justify on the basis of a linear model. Patrick A. Messerlin This paper examines the impact of trade and capital movements on French employment and relative wages. It provides three results. Firsf trade has a modest impact on total employment. Second, trade has a strong impact on relative wages the paper provides evidence supporting the saying that liberal trade is associated with better jobs rather than more jobs. Lostly, the paper shows that outword FDI is essentially done by exporting sectors and that inward FDI (which is broadly the same magnitude) occurs in the downsizing industries as well as in the exporting sectors. M. J. Artis, R. C. Bladen-Hovell, and W. Zhang This paper examines the performance of leading indicators for predicting turning points in industrial production of the G7 countries. The analysis is based upon leading indicator information and a chronology of industrial production turning points compiled by the OECD. Sequential probability models are applied to the prediction of turning points. This requires that a learning process be specified both for the conditional densities and for the transitional probabilities incorporated in the model. The results of the study indicate that in general, the time taken for the sequential probability to cumulate to a point where a turning point in industrial production is signalled is relatively stable across countries. The signal lead time, however, varies both across countries and between peaks and troughs for individual countries. Claude Giorno, Pete Richardson, Deborah Roseveare and Paul van den Noord This paper reviews the methods used for estimating potential output in OECD countries and the use of the resulting output gaps for the calculation of structural budget balances. The split time trend method for estimating trend output that was previously used for calculating structural budget balances is compared with two alternative methods, smoothing real GDP using a Hodrick Prescott filter and estimating potential output using a production function approach. It is concluded that the production function approach for estimating potential output provides the best method for estimating output gaps and for calculating structural budget balances. Economic Studies No. 23 (Winter 1994) Robert E. Baldwin This paper summarises and assesses recent studies on the impact of current trends in trade and direct investment on employment and wages in OECD countries and discusses various policy options being considered to meet the concerns of policy makers about these trends. Consistent with earlier OECD studies, a general conclusion is that such factors as changes in labour supplies, technology and demand are more important than changes in trading patterns in accounting for changes in employment and shifts in relative wages. However, further studies are needed to understand better the employment and wage impact of foreign direct investment. Peter Hoeller and Marie-Odile Louppe This article provides a brief overview of the content of the ECs internal market initiative and progress made in its implementation. It also describes the ECs medium-term programme towards ensuring that it becomes a practical reality, It analyses the mechanisms which should lead to welfare gains, and reviews a wide variety of micro - and macroeconomic indicators in order to ascertain whether integration has proceeded since the mid - 1980s. Policy issues, which are more or less closely linked to the success of the internal market initiative, are also addressed. These include competition policy, social and regional policy aspects and changes to the foreign trade regime. This paper reviews issues concerned with the long-run objectives of monetary policy. In particular, it looks at the case for aiming at zero inflation rather than a low positive rate in the long run. Available evidence on the net costs and benefits of disinflating within inflation ranges that are very close to zero appears inconclusive. Measurement biases in standard price indices may be large enough to be materially relevant to the choice of inflation objectives. Paul Van den Noord and Richard Herd This paper forms part of on-going OECD work on the economic assessment of public pension systems in view of the process of the ageing of populations. It provides indicative estimates of the size of public pension liabilities in the main seven economies based on simplifying assumptions, and analyses the sensitivity of these estimates for changes in pension rules and the discount rate. The methodology developed here combines actuarial approaches used in the private sector with so-called generational accounts. Such accounts indicate in present-value terms the lifetime financial burden government programmes impose on present and future generations. John Beghin, David Roland-Holst, Dominique van der Mensbrugghe This paper presents a survey of the growing literature on trade and environment linkages, focusing on the link between trade and environmental policies environmental regulation and competitiveness and trade liberalisation, growth and the environment. Linkages refer to environmental externalities environmental and trade policies consumer and social preferences towards the environment factor mobility, technology diffusion, and trade orientation. The paper contrasts South issues which are largely production-based and institutional, with North issues where both demand and supply generate substantial trade-environment linkages. Finally, the paper highlights the need for more empirical results and indicates directions and priorities for this work. Economic Studies No. 22 (Spring 1994) The paper develops a framework for the analysis of active labour market policies and uses that to structure various effects on wage setting, labour demand and labour supply. The empirical evidence on wage and employment effects is surveyed. Several design features are seen as crucial for success: compensation below market wages, strong emphasis on counselling and placement activities, targeting and avoiding the use of active programmes as a means of prolonging the duration of unemployment benefits. The conclusion is that most European countries are likely to do better with more of active labour market programmes but not a lot better. A. Steven Englander and Andrew Gurney This article reviews the theoretical and empirical literature on the sources of medium-term productivity growth and provides an empirical analysis of labour and total factor productivity (TFP) growth in the business sectors of OECD economies. Higher education levels, low initial productivity levels, moderate labour force growth and low inflation are the factors found to be associated with faster TFP growth. Faster capital accumulation accelerates labour productivity growth, but no evidence is found for a TFP growth bonus. Neither this article nor the other empirical studies examined can explain a significant portion of the productivity growth slowdown. A. Steven Englander and Andrew Gurney This note updates data on levels and growth rates of labour and total factor productivity in the business sectors of OECD countries. Productivity levels across countries are made comparable through the use of 1990 purchasing power data. While convergence has continued through the 1980s in productivity levels, considerable variation remains across OECD countries. Only limited evidence was found to suggest that there had been any pick-up in trend productivity growth during the 1980s. Joaquim Oliveira Martins This paper investigates the links between trade flows and industry relative wages for a cross-section of 22 sectors in 12 OECD countries. First, the industries are classified according to stylised facts about market structure. Second, import penetration trends are analysed during the period 1970-90, with special focus on imports from Asian NIEs. Finally, a wage equation is estimated encompassing both the characterisation of industries by type of market structure and measures of import penetration and export intensity. The results show that the impact of import penetration on wages is negative in industries with low product differentiation whereas the reverse result occurs in industries with high product differentiation and market segmentation. Andreas M. Fischer and Adrian B. Orr The effects on price uncertainty arising from the legislation of anti-inflation policies in New Zealand are assessed using the standard deviation of price-related expectations across respondents drawn from the Reserve Bank of New Zealand Survey. Also examined is whether diverging views about the current and future stance of monetary policy significantly contribute to price uncertainty. Legislative factors which enhance central bank independence are shown to reduce future price uncertainty and mitigate political influences. However, uncertainty relating to the stance of monetary policy increases price uncertainty, suggesting a transparent operation augments the benefits of inflation targets. Michael F. Forster In considering the possible effects of different tax and transfer systems in OECD countries, efficiency concerns have been the centre of the social-policy debate. There has, however, been a growing interest in assessing the extent to which these policies have succeeded in alleviating poverty. This article uses micro data for 11 OECD countries and concludes that simple and comprehensive measures of poverty are reduced once allowance is made for net transfers. The analysis explores different country patterns and shows the relative contributions of three elements to poverty reduction: incidence, intensity and inequality of low incomes. Economic Studies No. 21 (Winter 1993) David Grubb and William Wells This paper constructs indicators for the strength of employment regulation in EC countries, based upon fairly detailed descriptions of restrictions on dismissals, fixed-term employment contracts, temporary work agencies, and working time. It then considers a variety of indicators for patterns of work, such as the ratio of employee employment to population, concentration in the distribution of weekly hours worked, and temporary workers who would have preferred a permanent job. Many regulations appear to be influencing their targets as expected, but there is also evidence that regulation has undesirable indirect effects, reducing the overall level of the regulated forms of employment and increasing dissatisfaction among non-standard workers. Jorgen Elmeskov and Maitland MacFarlan This paper examines recent evidence relating to the persistence of high rates of unemployment in many OECD countries. It assesses the empirical relevance of some possible sources of persistence, including changes in the natural rate of unemployment, and slow labour market adjustment towards a longer-run equilibrium. While elements of various hypotheses may be needed to fully explain persistence, the evidence - while not conclusive - suggests that slow aujustment of both wages and employment is an important part of the story. Dave Turner, Pete Richardson and Sylvie Rauffet This paper examines whether divergent behaviour of output, inflation and unemployment in the G3 countries can be explained by differences in real and nominal rigidities in wage and price formation. Such rigidities are found to be much higher in the USA and Germany than Japan, reflected in correspondingly large disturbances to the real economy following demand or supply shocks. In Japan, the flexibility of hours worked and labour force participation are further reasons why disturbances to unemployment are small. The analysis further suggests that the USA may be particularly vulnerable to supply shocks originating from changes in ldquowedgerdquo variables, and Germany to changes in trend productivity growth. Jorgen Elmeskov and Karl Pichelmann This paper presents empirical evidence on trends and cycles of unemployment and labour-force participation. Some of the mechanisms behind the observed developments are analysed. The observed interplay between unemployment and participation has implications for the interpretation of unemployment as an economic and social indicator. The paper ends by presenting some unexplained puzzles concerning the interplay between trends and cycles of unemployment and labour-force participation. The paper sets out the theoretical arguments underlying the hypothesis of a hump-shaped relationship between the degree of centralisation of wage bargaining and real wages. Subsequently, it considers extensions to the basic model, drawing also on practical experience in various countries, and investigates the various dimensions of centralisation in the wage formation process. A review of the empirical literature in the field comes up with mixed results. This is not surprising given the diversity of effects discussed in the paper, which motivates why unambiguous policy conclusions do not seem possible. Economic Studies No. 20 (Spring 1993) A. Steven Englander and Thomas Egebo Fixing exchange rates between countries entering into the European Monetary Union shifts the burden of inter-regional adjustment onto labour and product markets. At present, rigid labour markets in European economies raise the output and employment costs of aqusting relative price levels at fixed exchange parities. High adjustment costs also reduce financial markets confidence that fixed-exchange rates and fiscal convergence commitments are feasible, entailing large interest differentials. By contrast, the growing integration of Member countries should diffuse country-specific demand shocks more smoothly than at present, and reduce the impact of localised fiscal policy as well. This paper examines the relationship between share prices and investment, addressing the question of whether investment is influenced by inefficient pricing in equity markets. The results indicate that while there is a significant relationship between share prices and business investment in some countries, this largely reflects share price correlation with, and anticipation of, other macroeconomic developments. Pricing inefficiencies, lo the extent they are present, do not seem to have a statistically or economically significant influence on investment. Peder J. Pedersen and Niels Westergard-Nielsen This paper examines evidence obtained from panel data concerning factors which influence individual transitions between different labour market states, particularly unemployment and employment. The effects of individual characteristics, such as age and education, are reviewed, as is the influence of training schemes. The survey then considers how a personrsquos labour market ldquohistoryrdquo, such as previous episodes of unemployment, affects hidher employment prospects. Also reviewed are the effects of unemployment benefits on the duration of unemployment, and various aspects of the job search behaviour of unemployed workers. Randall S. Jones, Robert E. King and Michael Klein Economic integration between Taiwan, Hong Kong and the coastal provinces of southern China has advanced rapidly in recent years. This paper analyzes the sharp increases in trade and investment within what may be called the Chinese Economic Area: Policy changes in Taiwan and, particularly, China have allowed deeper economic ties to develop, driven by the complementarities among the three economies. The integration of southern China has accelerated structural change in Hong Kong and Taiwan and played an important role in Chinarsquos rapid economic growth and transformation toward a more market-based economy. Marcos Bonturi and Kiichiro Fukasaku Based on firm survey data available in the United States and Japan, the paper examines how the trend towards globalisation in the 1980s, characterised by a FDI boom, has affected the size and trend of intra-firm trade (IFT) flows. The share of IFT in total US trade has been roughly stable at around 35 to 40 per cent and IFT is mostly concentrated in technology and human capital intensive industries. The example of Japanese and other Asian firms in the United States points to the importance of investment in wholesale activities in the promotion of exports. Economic Studies No. 19 (Winter 1992) Special issue . Costs of reducing CO2 emissions Andrew Dean and Peter Hoeller This paper summarises and analyses results of the OECDs Model Comparisons Project. The aim of the project is to better understand differences across six global models in the cost of reducing carbon dioxide emissions. In order to facilitate comparisons, key assumptions and reduction targets have been standardised. The paper provides evidence on. i) projected carbon dioxide emissions through the next century and ii) the carbon taxes and output costs entailed in reducing these emissions. Jean-Marc Burniaux, Giuseppe Nicoletti and Joaquim Oliveira Martins By modeling the decisions of households and firms, applied general equilibrium (AGE) models are able to capture the economic mechanisms that link, in each period of time, the available resource base to man-made emissions of CO2. The OECD Economics Department has developed a global dynamic AGE model with the objective of quantifying the economic effects of policies aimed at reducing emissions of CO2 in the atmosphere. The project is called the GeneRal Equilibrium ENvironmental model, hereafter referred to as GREEN. This paper provides a non-technical overview of the GREEN model specification, parameterisation and calibration. As such, it is a complement to the other papers on GREEN in this volume that report the results of various policy-relevant simulations with the model. John P. Martin, Jean-Marc Burniaux, Giuseppe Nicoletti and Joaquim Oliveira Martins This paper reports the results of several simulations with the OECDs GREEN model designed to quantify the economy-wide and global costs of a range of international agreements to curb carbon dioxide (CO2) emissions. Two particular aspects of international agreements are highlighted. The first is the issue of country coverage this is examined by simulating an agreement among the OECD countries alone and then extending it to encompass action by the non-OECD countries too. The second is the quantification of the potential welfare gains to individual countries and the world economy as a whole from implementing cost-effective agreements, i. e. international agreements that take account of the principle that the emission reductions should be secured at minimum cost. Joaquim Oliveira Martins, Jean-Marc Burniaux and John P. Martin This paper analyses the effects of unilateral action by one countryregion to curb CO2 emissions on both other countries emissions - the so-called carbon leakages - and changes in sectoral comparative advantage. Several GREEN simulations were run with one or all OECD countriesregions imposing a carbon tax with the aim of stabilising their emissions relative to the 1990 levels. The results suggest that the leakage rate would be small, contradicting the findings of other researchers. In order to test the robustness of this GREEN result, a sensitivity analysis was undertaken with respect to the supply elasticities of fossil fuels and the price elasticity of trade flows. The main conclusion is that the key parameter determining the size of the leakage rate is the supply elasticity of coal. Jean-Marc Burniaux, John P. Martin and Joaquim Oliveira Martins This paper highlights how the existence of distortions in energy markets could play an important role in designing a global strategy to curb CO2 emissions. Governments in many non-OECD countries appear to subsidies energy demand heavily. The existence e of these subsidies has several implications. First, eliminating these subsisides is an obvious candidate for a no-regrets approach to the design of an international agreement. Second, the economic costs to the world as a whole of curbing global emissions are overestimated when energy subsidies in the non-OECD countries are not treated as explicit distortions. Third, an international agreement involving the elimination of existing subsidies before phasing-in carbon taxes could be achieved at virtually no cost for the non - OECD countries taken as a whole so long as carbon reductions are cost-effectively allocated across countries. Peter Hoeller and Jonathan Coppel In response to the threat of global warming much attention has been paid to taxes levied on the carbon content of fossil fuels (carbon taxes), since they are potentially efficient economic instrument for reducing emissions of CO2, the main greenhouse gas. This paper first reviews the existing and evolving structure of fossil fuel prices and taxes and the relationship between energy prices and emissions. It then analyses the economic cost of superimposing carbon taxes on top of current energy taxes. Finally, using a simple energy demand system, tax reform proposals are simulated including restructuring present energy taxation by the average implicit carbon tax and a carbon cum energy tax similar to the EC proposal. Economic Studies No. 18 (Spring 1992) This paper considers the growth in regional trading arrangements (RTAs) in the world economy over the period 1961-89. The number of RTAs and of countries participating in them and the intra-area freeing of trade have certainly increased. However, the empirical evidence from an examination of the import trade data for four RTAs among OECD countries (EC, EFTA, Canada-United States FTA, and Australia-New-Zealand CER) does not support the view that RTAs have led to a growing regionalisation of world trade. There is some tendency for world trade to become more polarised as the share of intra-area imports has increased for the westem European and ASEAN regions but not for the North American region. The paper surveys the literature on trade diversioncreation and other effects on non-member countries and considers the effects of RTAs on the multilateral trading system. Thomas Egebo and A. Steven Englander The success of ERM countries in reducing inflation has led to much analysis of whether ERM membership has given rise to policy credibility effects. This article examines the analytical foundations of the credibility hypothesis, reviews the econometric evidence on whether or not credibility contributed to low-cost disinflation in ERM countries and provides independent estimates of possible credibility effects since 1987. The article finds some policy credibility effects in financial markets in the second half of the 1980s, but there is little evidence that credibility effects in labour or product markets have significantly reduced the costs of disinflation. This paper deals with the measurement of the non-market production of goods and services by households and explains why the issue is important for various areas of economic analysis. It discusses the definition of production in the UN-OECD System of National Accounts. It then reviews and assesses different measurement methods of the value added by non-market productive household activities. Estimates of the value of unpaid labour for several OECD countries are compared and their importance relative to official measures of GDP, private consumption and household disposable income is shown. The paper concludes with suggestions for future research. Robert J. Flanagan This paper reviews theory and evidence on how market economies solve the labour allocation and performance problems and draws lessons for the economic transitions in the countries of Central and Eastern Europe (CEECs). The paper begins by addressing the role of wages and competitive labour market mechanisms in skill acquisition and in the industrial allocation of labour. Subsequent sections address institutional aspects of wage formation, the conflict between the efficiency and distributional aspects of wages, and how wage incentives are used to encourage high performance within organisations. The problem of establishing effective managerial incentives in CEECs receives particular attention. The paper concludes with a consideration of the difficulty in establishing effective incomes policies to counter the threat of inflation during the economic transitions in CEECs. Tito Boeri and Mark Keese The initial phase of the transition from centrally-planned to market-based economies has been marked by a rapid rise in unemployment in Central and Eastern Europe. While this may have been inevitable in the short-run, high and persistent levels of unemployment could strain the social consensus supporting the current reforms. The risks of this occurring are discussed in this article which first presents an overview of labour markets under central planning and then analyses recent developments, including the changing structure of employment, growth of the private sector and the composition of the pool of unemployed. A final section discusses some implications for labour market policies. Economic Studies No. 17 (Autumn 1991) Peter Hoeller and Pierre Poret The P-star approach has been developed by the U. S. Federal Reserve as a new indicator of inflationary pressures. This paper assesses its usefulness for 20 OECD Member countries. Regression results are presented and in-sample tracking ability and forecasting performance of the equations are compared to rival inflation models and official OECD projections. This paper examines the historical patterns among the returns and return volatilities of stock market indices for 15 OECD countries over the last thirty years. It characterises trends in gross volatility and measures of inter-market correlations, describing the degree and manner in which these statistics have changed over time. It discusses the implications of transitory periods of excess volatility for real economic activity and considers financial policies that have been proposed in the United States to limit such volatility. The results suggest that the past three decades have coincided with a world-wide increase in the average levels of volatility in stock returns as well as a general increase in the strength of the positive correlations among national stock index returns and the conditional volatilities of these returns. The evidence to date does not suggest that the increase in volatility has had strong effects on economic activity. Robert Ford and Pierre Poret In a recent study, David Aschauer concluded that the significant slowdown of the growth of private-sector total factor productivity in the United States in the early 1970s was due to the contemporaneous slowdown in the rate of investment in public-sector infrastructure. If he is right, the obvious policy implication is that boosting infrastructure investment would be a good way to promote economic growth, a course that has been recommended by some economists. This note examines data for twelve OECD countries and finds that support for Aschauerrsquos hypothesis is not strong. In particular, the regression results presented here are not sufficiently robust to provide much support for the policy of a sharp rise in infrastructure investment. Peter Hoeller and Markku Wallin Taxes levied on the carbon content of fuels (carbon taxes) are being considered in many OECD countries as a possible policy instrument to reduce carbon dioxide emissions. This paper first reviews the policy response in OECD countries to the threat of global warming. It then discusses the link between carbon emission intensities and current energy prices. It examines the relative price effects of current energy policies and the implicit carbon taxes reflected in present energy taxation for different fuels. Finally, the likely effect of a carbon tax on energy prices and emission intensities is discussed. Real interest rate trends. the influence of saving, investment and other factors Warren Tease, Andrew Dean, Jorgen Elmeskov and Peter Hoeller This paper examines the trends in saving, investment and real interest rates. In doing so an attempt is made to identify some of the major influences on real interest rates in the past. In addition, some prospective influences on the course of real interest rates - government saving, the demand for funds from non-OECD countries and demographics - are considered. Howard Oxley and John P. Martin During the 1980s most OECD governments launched medium-term strategies to restore greater balance to the public finances. It was generally agreed that the brunt of the strategy should be borne by expenditure cuts rather than tax increases. This paper describes how governments achieved better budgetary control in the 1980s, examining trends in deficits, revenues and expenditures. The focus throughout is on general government which accounts for most of public sector activity in OECD countries. It also assesses the main spending pressures which OECD governments are likely to face in the 1990s and suggests some possible policy responses. Economic Studies No. 16 (Spring 1991) Jon Nicolaisen, Andrew Dean and Peter Hoeller Concerns over the pace, scope and causes of environmental degradation have led to a renewed interest in the way environmental and economic policies interact. This paper first reviews the main causes for excessive use of environmental resources in a market economy, focusing also on economy-wide implications. The merits of different policy instruments to counter environmental degradation are then discussed, and the information needed for the successful conduct of environmental policy is reviewed. The paper also considers the policy options to cope with uncertainties surrounding cost and benefit estimates. Finally, the paper highlights some policy issues concerning international co-operation on regional and global issues. Peter Hoeller, Andrew Dean and Jon Nicolaisen This paper surveys various estimates of the macroeconomic implications of reducing greenhouse gas emissions. Most available studies focus on policies to reduce CO2 emissions and are limited to the costs of such policies. The survey first examines the key factors shaping baseline emission scenarios. It then looks at the aggregate cost of emission reductions, as shown by both global and country-specific models, and discusses the key determinants of the model outcomes. The paper also briefly reviews other options for reducing greenhouse gas emissions and draws some more general lessons for the policy response to the threat of climate change. Robert Ford and Pierre Poret Growth of the capital stocks of OECD countries has flagged in the 1980s, despite a rebound in gross business fixed investment. This has raised concerns of a shortage of capital and focused attention on government policies to further raise investment. The evidence presented in this article does not provide support for the standard theories of investment demand, on which such policies are based. Thus, there is little evidence that government incentives will raise capital accumulation. Peter Dittus, Paul S. OBrien and Hans J. Blommestein Since the early 1980s the third-world debt crisis has contributed to fragility in parts of the OECD financial system, brought to a halt growth in many indebted countries, and reduced regional and world trade flows. To investigate the role international linkages between large debtor countries and OECD countries have played in the evolution of the debt situation, purpose-built macroeconomic models of major Latin American economies, integrated with the OECDs INTERLINK system for analysing OECD macroeconomic developments, have been developed. These models are used to show the relationship between debt indicators and OECD fiscal and monetary policy, exchange rate and price developments, as well as to assess the contribution of domestic factors and of various overall strategies of dealing with debt - including the role of new money and debt reduction packages. Beacuteneacutedicte Larre and Raymond Torres Levels of productivity in the OECD countries have become more uniform since the early 1960s however, the process is uneven and hard to explain from the theoretical point of view. In neo-classical analysis of growth, catch-up occurs spontaneously as a result of the spread of technological progress and capital accumulation. In this paper, developments in three southern European countries are discussed in an effort to throw some light on the factors involved. Catch-up appears not to be spontaneous the acquisition of technology and efficient capital accumulation depend largely on the degree of development of market mechanisms and the quality of social and economic infrastructures. Stephen Bazen and John P. Martin Throughout the 1970s and 1980s, the real value of the minimum wage in France has risen due to its frequent up-rating. However, unlike in the United States where the minimum wage is increased infrequently, studies of the French youth labour market have been unable to identify a significant impact of the minimum wage on youth employment. One possible reason for this is that the standard model used to analyse the relationship between the minimurn wage and youth employment is inappropriate. Using an alternative approach, increases in the minimum wage are found to increase real wages of youth, while the impact on adult wages is much smaller. It proved very difficult, however, to derive robust estimates of the impact of real wages on youth and adult employment. But such evidence as there is suggests long-run minimum wage elasticities of youth employment of -0.1 to -0.2, similar to those found in the North American literature, and zero for adult employment. Economic Studies No. 15 (Autumn 1990) Olivier Blanchard, Jean-Claude Chouraqui, Robert P. Hagemann and Nicola Sartor Sustainability of fiscal policy is traditionally assessed by projecting the ratio of public debt to GNP taking into account expected budgetary developments. In the same spirit, the paper presents an indicator of sustainability to illustrate how much change in government spending andor taxation should be made to assure that the ratio of public debt to GNP remains unchanged. Using this new indicator, the paper appraises the degree to which current fiscal policies are sustainable in a sample of OECD countries over short, medium, and long-term horizons. Robert Ford and Wim Suyker Subsidisation of industrial activities distorts the allocation of scarce resources, is a burden on government finances and generates friction in international trade. This paper draws on a wide range of data sources to examine industrial subsidisation in OECD countries. The sectoral distribution of subsidies and the relative importance of the different instruments of subsidisation are highlighted. The final section of the paper evaluates, to the extent possible, the economic effects of subsidy policy. This article summarises the background and content of a new OECD data base on the personal income tax and indicates a number of areas in which these new data can be applied. It also reviews the different measures of progressivity of personal income tax and describes the different aspects of tax progressivity reflected by the different measures. Finally, it presents and discusses estimates of income tax progressivity in most OECD countries. The article derives the spontaneous demand for new dollar assets arising from the growth of global private portfolios which is compared with the exogenous supply of such assets. This simplified flow approach suggests that the growth of global portfolios could continue to translate into an important demand for new dollar assets, albeit not sufficient to fully cover the expected financing need. Whether this would require higher expected returns on dollar assets relative to assets denominated in other currencies will largely depend on spontaneous portfolio diversification. While in the near future this process could remain favourable to the dollar, over the longer term - as financial markets outside the United States increase their breadth and depth - it could become less supportive of this currency. Adrian Blundell-Wignall, Frank Browne and Paolo Manasse Rapid progress in financial market deregulation and innovation has occurred in most large OECD economies since the early 1970s. One important consequence of this has been enhanced competition and improvements in the allocative efficiency of financial markets. However, transitional costs (higher inflation and balance-of-payments difficulties) have also been encountered by many economies. At the same time, the process of financial liberalisation has been accompanied by new and longer-run challenges for monetary policy. Thus, liquidity constraints have been reduced, enabling expenditure decisions to be based more on expected wealth and relative prices, implying new transmission mechanisms for monetary policy. The importance of monetary aggregates as an indicator for monetary policy have been one casualty of this development, while the role of financial prices has increased. Economic Studies No. 14 (Spring 1990) Andrew Dean, Martine Durand, John Fallon and Peter Hoeller National saving ratios are generally lower now than in the 1960s or 1970s. This paper first reviews developments in national and international saving and investment trends in OECD countries since the 1960s. It then examines sectoral saving trends and considers the links between them. There are seen to be important offsets between government and private sector saving and, within the latter, between the business sector and households, so that national and private saving rates tend to be more stable than their component parts. The paper looks in particular at the reasons lying behind the volatile behaviour of household saving in certain countries in recent years. Frank Browne and Paolo Manasse The paper is devoted to an empirical examination of the information content in the term structure of nominal interest rates for future inflation. Tests of the ability of the term structure to forecast future changes in the inflation rate are carried out for six major OECD countries using monthly data. These tests demonstrate that the term structure does have considerable forecasting ability, particularly for rates taken from the short end of the maturity spectrum. However, with one exception, forecasting power tends to fade or disappear completely when the term structure in question is formed using, as the long rate, yields on increasingly distant maturities. This suggests that changes in the nominal term structure using such rates reflect mostly changes in the term structure of ex post real interest rates. Gene M. Grossman Popular support is growing in Europe and North America for an industrial policy that would encourage entry of national firms into new industrial activities. The activities that proponents have in mind are primarily technology-based and skilled-labour intensive. Recent analysis has sought to identify the distinguishing features of modern industries and to evaluate the arguments for government policy support in the light of these features. This paper reviews a number of economically based arguments for an active industrial policy. The arguments rely on the alleged importance to modern industrial competition of economies of scale, of learning-by-doing, of externalities stemming from RampD, production experience, on-the-job training and demand linkages, and of imperfections in capital and product markets due to asymmetries of information. In each instance, the logical merits and empirical relevance of the case for government action are evaluated and an attempt is made to identify an appropriate policy response where it seems warranted. Raymond Torres et John P. Martin Over the past decade much greater attention has been paid to setting economic policies in a medium-term framework. In this context, potential output can play a useful role as a summary indicator of aggregate supply, and it does so in the OECDs medium-term work. The aims of this paper are three-fold: i) to explain the method used by the OECD to derive a measure of potential output ii) to present recent OECD estimates of potential output and capacity utilisation for the seven major OECD countries and iii) to illustrate some of the possible effects of faster productivity and potential output growth on macroeconomic performance. Thomas Egebo, Pete Richardson and Ian Lienert Housing investment accounts for a small but cyclically volatile share of GNP in the major OECD economies. This paper surveys a range of recent empirical studies of housing and presents a set of estimated equations for the seven major countries in the OECD INTERLINK model. These results suggest that reasonable estimates can be obtained by applying a common stock-adjustment approach to housing, in spite of major variations in institutional factors. Economic Studies No. 13 (Winter 1989) Special issue . Modelling the effects of agricultural policies Carmel Cahill and Wilfrid Legg Producer and Consumer Subsidy Equivalents (PSEsCSEs) are the main indicators for measuring levels of agricultural assistance in OECD countries. This paper describes the concept and discusses the practical measurement of the PSE and CSE as applied in the OECD calculations. The PSECSE is one of several methods of measuring assistance which are briefly reviewed. The effects of changes in exchange rates and the treatment of supply controls are examined, as these are key issues in the interpretation and use of the results in monitoring agricultural policy reform and in trade negotiations. The paper concludes that the PSECSE is a useful tool for policy analysis and is constantly evolving to meet the needs of policy-makers. H. Bruce Huff and Catherine Moreddu The MTM model is a medium-term, comparative-static, partial-equilibrium model of world agriculture, comprising eleven country models linked through trade. I t was constructed to evaluate the domestic and international market impact of a reduction in assistance to commodities, as measured by PSEs and CSEs. Recently, the model has examined these impacts on production inputs, net farm income, developing countries, and specific types of agricultural policies. Jean-Marc Burniaux, Franccedilois Delorme, Ian Lienert and John P. Martin This article provides the methodological background of the WALRAS model which has been developed by the OECD to quantify economy - and world-wide effects of agricultural policies in OECD countries. WALRAS is a multi-sector applied general equilibrium model in which the major OECD agricultural trading countriesregions are represented in a fully integrated world framework. The paper describes the structure of the model and discusses the main economic mechanisms at work with the help of diagrammatic representations. It also discusses the data and parameter values used to calibrate the model. Agricultural policies in OECD countries are complex: they include price supports, income payments, trade barriers and domestic supply controls. This paper relies on the PSECSE data and other information to quantify various policy instruments for use in the WALRAS model. It finds that import taxes and export subsidies are particularly important in Japan and the EC, whereas subsidies for supporting domestic production are the main form of farm support in Canada and the United States. John P. Martin, Jean-Marc Burniaux, Franccedilois Delorme, Ian Lienert and Dominique van der Mensbrugghe This paper reports the results of various scenarios with the OECDrsquos applied general equilibrium model, WALRAS. These quantify the long-run effects of agricultural policies in OECD countries on resource allocation between the agricultural and non-agricultural sectors, on factor returns, on trade volumes and prices, and on economic welfare. The results suggest that existing levels of farm support in OECD countries are costly, both to the OECD countries and to non-OECD countries. The paper also presents a range of policy-relevant simulations designed to highlight certain aspects of the current debate on agricultural reform. Dominique van der Mensbrugghe, John P. Martin and Jean-Marc Burniaux This paper aims to provide an assessment of the robustness of WALRAS simulation results. It does this by presenting the results of sensitivity analysis with respect to changes in both the specification of the model and the values of its key exogenous parameters. None of the three changes in model specification examined makes a major difference to the results. The analysis reveals that the import and export demand elasticities are the most crucial exogenous parameters in WALRAS. However, the presumption that agricultural liberalisation should lead to real income gains is shown to be very robust, even to wide variations in the trade elasticities. Franccedilois Delorme and Dominique van der Mensbrugghe This paper describes a version of the WALRAS model which incorporates scale economies and imperfect competition. This model, referred to as WALRAS-SE, is calibrated to Canadian data. The paper first outlines the theoretical considerations involved, and describes how two alternative assumptions concerning the pricing behaviour of producers in imperfectly competitive markets were implemented in the model. WALRAS-SE is then used to assess the economy-wide effects of unilateral agricultural liberalisation using 1986-88 levels of support. Finally, the results shed light on the key interaction between the structure of support and the sectoral location of economies of scale. Agricultural support costs OECD countries 72 billions of U. S. dollars per year in lost income. It is frequently argued, however, that this is not waste, but is rather a fair price to pay for a number of non-economic objectives such as thriving rural communities and increased national food security. This paper analyses these objectives and their relationship with agricultural policy. It draws three conclusions: first, the so-called non-economic objectives are, in fact, economic second, they are amenable to quantification and economic analysis and, third, present forms of agricultural support may be inefficient means to achieve these objectives. Economic Studies No. 12 (Spring 1989) J. David Richardson This paper surveys recent empirical research on the benefits of trade liberalisation with imperfect competition and scale economies. Computable general-equilibrium studies are surveyed, as are a large number of partial-equilibrium studies. The first typical conclusion from the studies surveyed is that calculated gains in national purchasing power are usually two to three times the size of those estimated in traditional frameworks with perfect competition. The second is that calculated adjustment pressures from trade liberalisation are considerably higher than implied in most commentary, and higher also than estimates from traditional models. Robert P. Hagemann and Giuseppe Nicoletti Population ageing in the OECD area is expected to affect labour and product markets, and national rates of saving and capital accumulation. Ageing will also place significant pressures on public finances as the share of future output transferred to a large dependent population rises. This paper discusses some of the potential effects of ageing, with particular emphasis on its implications for financing public pensions in Japan, the Federal Republic of Germany, Sweden, and the United States. Future increases in retirement age and reduction of the ratio of benefits to wage levels could help reduce pressures on public finances, while a trust fund can help smooth the transition. Alan J. Auerbach, Lauence J. Kotlikoff, Robert P. Hagemann and Giuseppe Nicoletti Demographic changes such as population ageing have many effects that influence a countrys fiscal viability. This paper uses a dynamic general-equilibrium model with overlapping generations to evaluate the macroeconomic and fiscal consequences of population ageing in four OECD countries: Japan, the Federal Republic of Germany, Sweden, and the United States. One of the fundamental lessons is that allowing for general equilibrium adjustments reduces the adverse welfare effects of increasing dependency ratios. Nevertheless, the welfare costs and their distributions acmss cohorts pose serious challenges to policy-makers in some cases. Luca Barbone and Pierre Poret This paper treats expected macroeconomic payoffs from greater competition in product and labour markets by analysing how the four largest European countries would respond to shocks if they had the same degree of price and wage flexibility as the United States. Based on simulations carried out with the INTERLINK model, the main results are: a) fiscal stimulus is more inflationary andproduces smaller output gains when flexibility is increased ii) following an adverse external supply shock, greater flexibility serves to stabilise prices and minimise output losses, depending, for some countries, on the stance of monetary policy and the exchange-rate regime. During the last decade, measures have been taken in many countries to deregulate previously regulated industries and to privatise government-owned enterprises. This paper describes these developments with special focus on the transport and telecommunications industries and reviews the theoretical considerations behind the change in policy approach. It is argued that regulation of prices, restrictions on entry to certain industries and government ownership often lead to inefficiencies which seriously impair the welfare gains expected from such measures. Moreover, regulation is sometimes introduced in markets which left to themselves would have yielded efficient outcomes despite a concentrated production structure. The United Nations System of National Accounts defines aggregates such as income, production, saving and investment which are the basic concepts of macroeconomics. The present SNA is twenty years old and is now being reviewed by statisticians and economists from national administrations and international organisations. The main aim of the review is to update the System to take account of institutional developments that have occurred in the last two decades, but the review has also touched upon some fundamental questions such as the distinction between current and capital transactions, depletion of natural resources and the boundary of economic production. Economic Studies No. 11 (Autumn 1988) A. Steven Englander, Robert Evenson and Masaharu Hanazaki What happened to the pace of innovation during the 1970s This article presents evidence from patents data, regression analysis and stock market data suggesting that the pace of innovation slowed in most industries during this period, despite remarkable advances in some areas, such as information technology. Such a slowdown in innvoation could partially account for the observed slowing in total factor productivity ITFP) growth. The paceof innovation may have accelerated in the early 1980s, and could contribute to a resurgence of TFP growth in the years ahead. Do expectations of future financing burdens lead the public to save more when the government runs large deficits This paper analyses the impact of fiscal expectations on consumption in eight OECD countries. Estimates of a dynamic demand system, based on an extended life-cycle model embodying fiscal expectations, are reported. The results suggest that: i) the governments inflation-tax is anticipated by consumers and ii) while private savings do not adjust fully to changes in government deficits and hence debt is not neutral in its effects on spending, expectations of future policy corrections depress private consumption quite noticeably when public debt is explosive. David T. Coe, Martine Durand and Ulrich Stiehler The disinflation of the 1980s has been one of the outstanding achievements of macroeconomic policies in OECD countries. After reviewing aggregate price developments between 1980 and 1987, this article discusses and quantifies the main influences which contributed to falling inflation rates. Based on simulations carried out with the OECD INTERLINK model, the main reasons for improved inflation performance are analysed. This full-model approach shows that restrictive monetarypolicy between 1980 and 1983 was the principal factor accounting for the return to more stable price levels in OECD countries. Declines in oil prices also played an important role in sustaining the process after 1985. Robert J. Flanagan This paper analyses the role of increasing maladjustment in the labour market as a source of high unemployment, particularly in Europe. After reviewing and dismissing several labour-supply explanations, the paper focuses on the role of changes in employer hiring decisions. It argues that the reluctance of European employers to hire is related to specific economic and institutional developments, such as pa y compression and greater output uncertainty, that have altered hiring incentives. It demonstrates both the development of a general reluctance to hire and specific effects tied to these incentives in some countries. This note provides evidence from pooled time-series cross-section data on the extent of non-tariff trade barriers in OECD countries. This is accomplished through the estimation of normal import shares in GDP and of deviations from average values for individual OECD countries. Natural barriers to trade - distance and cost of transportation - are assessed through econometric estimates of a relationship linking cif-fob margins to distance. Finally, a discussion is provided regarding the issue of underimporting in sub-categories of total imports. Economic Studies No. 10 (Spring 1988) Total factor productivity growth (TFP) for the OECD has slowed from just under 3 per cent a year in the 1960s to about 0.5 per cent in the 1980s. This has led not only to a slowdown in the improvement of living standards, but indirectly to stronger inflationary pressures and higher rates of unemployment. This study identifies the slowing of capital accumulation, reduced capacity utilization, reduced opportunities for technology transfer and catch-up, and possibly a slowing in new technology generation as macro and structural influences behind the TFP growth slowdown. This paper reviews recent developments in the OECDrsquos international macroeconomic model, INTERLINK, the evolution of its simulation properties and the key relationships involved. In doing so, it updates much of the information published in earlier OECD studies related to international economic linkages and the INTERLINK model in particular. The article examines recent developments in index number theory and their implications for the measurement of inflation and growth. The kinds of price and volume indices which are typically compiled in most countries are shown to be only second best from a theoretical viewpoint, so that their movements should not be taken too literally. A consensus in favour of chain indices seems to be emerging among index number specialists even though they are still not used much in practice. The paper attempts to throw more light on the properties of chain indices and also presents a new type of chain index. Jeffrey R. Shafer How might the world economy have looked different in the 1980s if a large deficit had not arisen in the U. S. current account This paper examines such a counterfactual history in which U. S. public and private saving behaviour and dollar exchange rates remain roughly as they were in the late 1970s. It concludes that i) macroeconomic performance would not have been clearly better in the OECD area and ii) although the tensions arising from the U. S. external imbalance would have been reduced, imbalances within Europe might well have given rise to other tensions. Robert P. Hagemannn, Brian R. Jones and R. Bruce Montador This paper examines the question of tax reform in OECD countries. First, the reasons for tax reform are reviewed. These include economic efficiency arguments as well as concerns about equity which are often a major consideration. Next, the paper considers the many factors which constrain governments in their effort to reform the tax system (such as inherent conflicts between efficiency and equity, and the non-revenue objectives of taxation), and how those constraints might be reduced. Finally, the paper reviews the extent of tax reform in OECD countries, noting some of the remaining problems. Economic Studies No. 9 (Autumn 1987) What are the effects of OECD countriesrsquo agricultural policies on their economic well-being The article first establishes a conceptual framework for assessing the impact of protectionist policies on aggregate economic welfare, and then reviews sixteen recent studies - ranging in complexity from single-sector studies to general equilibrium models - which have quantified the social costs arising from agricultural policies in Japan, the United States and the EEC. After considering related aspects of agricultural policy, including national security and income distribution and stabilization, the article concludes that the economic returns from reform of agricultural policies are substantial. Jeffrey R. Shafer Rapid innovation and regulatory change in the financial sector have eroded barriers between once-distinct markets within countries and internationally, enhanced the flexibility and range of instruments traded in secondary markets and created an intensely competitive market environment in many areas where competition had once been restrained. This article explores how these broad changes may be altering the probability of crises in financial markets and the forms they might take. It concludes by drawing implications for the role of the lender of last resort and other systemic safeguards in averting or containing crises in the future. Although the exchange rate is one of the most important economic variables, it has proved to be difficult to explain its movements. One of the difficulties is attributable to changes over time in the relative importance of various determinants of exchange rates, such as interest rates and balance of payments. This article tries to explain exchange rate movements by a model with a risk premium term and parameters which are affected by structural shifts in international financial markets. The results show that risk premium factors are highly significant, while real interest rate differentials have been increasing in importance in recent years. This article explains how the OECD system of leading indicators is constructed, covering the choice of reference cycles, selection of indicator series, identification of turning points, trend estimation and aggregation of series to produce composite indicators. The ability of the composite leading indicators to predict turning points in the industrial production cycle is evaluated using both the complete data that became available after the event as well as the more limited data set that was actually available at the time the indicators were first published. A final section looks at the ability of composite indicators to predict levels. Martine Durand and Claude Giorno This paper reviews the methodological problems involved in constructing indicators of international competitiveness and provides some elements for their evaluation. It presents the measures of competitiveness calculated by the OECD and compares them with those published by other institutions. This comparison highlights the importance of the conceptual principles underlying the construction of such indicators and points to their respective areas of application. A number of indicators portraying special aspects of competitiveness phenomena are then described, together with examples of how they might be used, to illustrate the value of such measures, notably for purposes of cross-country analysis. Derek Blades and David Roberts The OECD has recently published a new set of benchmark Purchasing Power Parities (PPPs) for twenty-two Member countries based on price and expenditure data for 1985. The countries include Australia, New Zealand, Sweden and Turkey, for which PPPs have neverpreviously been calculated. The main purpose of this note is to present these new PPPs and to explain how they differ from the previous benchmark estimates for 1980. The note also contains a brief discussion of the uses of PPPs and a short description of how they have been calculated. A final section gives some estimates for 1986 and 1987. Economic Studies No. 8 (Spring 1987) Andrew Dean and Val Koromzay This paper focuses on the large current-account imbalances among OECD countries that have emerged over the past several years, and on how the evolution of these imbalances might be influenced by various hypothetical changes in the world economy. Quantitative estimates of how exchange-rate changes, changes in relative growth rates among countries or government budget actions might affect external balances are presented. Particular emphasis is given to an analysis of the various channels through which changes in specified variables affect external imbalances, and an assessment of the relative importance of these channels. Mitsuhiro Fukao and Masaharu Hanazaki This article analyses the effects of the internationalisation of financial markets on the allocation of capital. It examines the increased integration between domestic and international financial markets and the tendency towards convergence of real interest rates among financially open countries. The article then deals with long-term implications for the international allocation of capital, with emphasis on tax distortions. Using estimated tax wedges for business investment and the supply block of OECDrsquos INTERLINK system it show that, under integrated financial markets, the tax distortions could generate a large imbalance in a countryrsquos net external asset position, involving a significant welfare cost. K. C. Messere and J. P. Owens International tax statistics are frequently used to compare tax burdens and the extent of government intervention in the economy. This article examines the conceptual and practical problems encountered when making such comparisons and identifies similarities and differences in tax level trends in OECD Member countries. It also provides some explanations for these trends. James H. Chan-Lee, David T. Coe and Menahem Prywes Since 1980 there has been an important decline in wage inflation and also a renewed emphasis on enhancing the supply-side flexibility of economies. This article surveys changes in microeconomic policies affecting the labour market, and in wage-setting practices. Although there have been an impressive number of new developments, for any single country most of the changes have been relatively modest and comparatively recent. The article then discusses how these changes might affect aggregate wage developments and attempts a quantitative assessment of their significance. Service activities, broadly defined to cover all activities that do not result directly in the production of goods, now account for the major part of GDP and employment in OECD countries. This article examines the relative importance of different service activities in terms of their contribution to GDP and employment and their growth rates over the last two decades. Services cover a disparate collection of activities which have experienced widely differing growth rates. It is helpful to distinguish between at least three groups - collective services provided by government, services linked to goods production, and what are here termed free-standing services. Economic Studies No. 7 (Autumn 1986) Antonio M. Borges Introduction of a solution algorithm and the increasing power of computers have made possible the development of complex general equilibrium models and their use in analysing economic policy issues. This paper surveys applied general equilibrium models, analyses their advantages and remaining weaknesses for various policy applications, and discusses efforts to improve on existing models and to extend their usefulness. It concludes that general equilibrium models are indispensable in determining long-term effects of a number of important policy measures (e. g. tax reforms) in a consistent manner, although important aspects of real world economies remain to be integrated into these models. Michael J. McKee, Jacob J. C. Visser and Peter G. Saunders Concern for the effects of taxation on the incentives to work, to employ labour, to save and to invest has focused the attention of policymakers on marginal tax rates. This paper provides some illustrative total marginal tax rates on factor use for most OECD countries. The rates aply to two related pairs of decisions: to supplyemploy labour and to save and invest (supplydemand capital). The rates are total in that they attempt to integrate the effects of all taxes levied on these pairs of decisions by all levels of government. Jean-Claude Chouraqui, Brian Jones and Robert Bruce Montador This article examines the implications of the recent sharp increase in the ratio of public debt to GNP in most OECD Member countries. The evolution of public debt is also analysed within the wider framework of the government sectors net worth. One particular element in this approach - the future pension liabilities of governments - is seen to have a significant bearing on the debt outlook in several countries. The article then assess the sensitivity of the public debt profile under alternative economic conditions and fiscal policy settings. Finally, it reviews the possible consequences of high andor rising levels of debt. Paul Saunders and Andrew Dean The linkages between the debt situation of some of the most indebted developing countries and conditions in the OECD economies are explored by the use of a model which relates developing country debt to changes in OECD growth, prices, interest rates and other key variables. The way in which financial ratios for certain groups of debtor countries could develop over the next five years is examined on the basis of assumptions about world economic developments. Simulations on alternative assumptions allow an assessment of the importance of the linkages and the sensitivity of the debt situation to developments in the OECD economies. Pure profits and Tobins q in nine OECD countries James H. Chan-Lee This paper presents valuation ratios (Tobins q ) for nine countries. Tobins q embodies market expectations and is an indicator of expected pure profit rates on the existing capital stock. Since 1982, equity markets have recovered substantially. By end-1985, values of Tobins q were close to their 1974 levels and to the symbolic figure of unity. The theoretical and conceptual relevance of q is considered, as well as data and measurement limitations. Real debt and equity costs of finance are considered in the light of buoyant stock markets. The implications of the strong recent recovery in q for investment are also noted. Economic Studies No. 6 (Spring 1986) Friedrich Klau and Axel Mittelstaumldt Differences between unemployment rates for countries or regions may be explicable in terms of different degrees of labour market flexibility. This article discusses some of the meanings of that term, and related macroeconomic implications. External price or supply shocks arising in conditions of rigid labour markets are thought to lead to higher structural unemployment. Making labour markets more adaptive and responsive to changing demand and supply conditions would therefore help to remove impediments to a return to sustainable high employment levels. David Encaoua and Paul Geroski This article examines the relationship between the competitive environment facing firms and the extent to which prices charged by these firms are responsive to changes in costs or demand. A model of optimal dynamic pricing is developed and tested on disaggregated industry data from five countries. The general conclusion is that in those sectors where competitive pressures - as proxied by several different indicators - are relatively weak, price smoothing is an important phenomenon. The implications of this finding for macroeconomic behaviour of economies are briefly considered, and in particular the light it sheds on neoclassical versus fix-price paradigms for macroeconomic theory. John Helliwell, Peter Sturm, Peter Jarrett and Geacuterard Salou This paper describes modifications to, and further developments of, the supply block in the Secretariats world model INTERLINK as of autumn 1985. The objective of the work was to strengthen the role in the model of supply side elements, in particular profitability. In the process, stockbuilding was endogenised, assigning to inventories an important buffer role between sales and output in the dynamic adjustment process. Price formation has been linked more coherently to the revised supply structure via a dual cost function, and labour supply has been endogenised. When the prices of goods andservices sold in different OECD countries are converted into a common currency by means of market exchange rates, differences emerge between countries in both the levels andpatterns of their prices. These differences, which are both substantial and persistent, are systematically related to levels of real per capita GDP. They show that there is no tendency for exchange rates to equal the purchasing power parities for final domestic expenditures, at least between countries with markedly different levels of real per capita GDP. Economic Studies No. 5 (Autumn 1985) Paul Atkinson and Jean-Claude Chouraqui During recent years real interest rates, both short - and long-term, have been high by historical standards in many OECD countries, regardless of the measure of expected inflation used to adjust nominal rates. A number of domestic factors which may have contributed to unusual upward pressure on interest rates, as well as international transmission aspects, are analysed, but none can be attributed a dominant role. Daniel S. Hamermesh Available research suggests that when the relative supply of women to the labour market increases, as it did in most developed countries in the 1960s and 1970s, the wage rate of young workers must fall relative to other wages if youth unemployment is not to rise. This paper discusses the evidence from related empirical studies and evaluates their research methods. The historical determinants of nominal wages are analysed for eleven OECD economies, and consideration is given to the implications for future development of wages, and hence of inflation. There appears to be little risk of renewed inflationary pressures emanating from the labour market, because unemployment rates are currently (sometimes substantially) above estimates of the non-accelerating inflation rate of unemployment. Specific measures of wage flexibility are also derived by any measure, Japan stands out as the country having the most flexible wages. James H. Chan-Lee and Helen Sutch There was a widespread decline in profit rates from 1960 to 1982 in some countries, profit shares fell. In the 1970s these phenomena became general, accompanied by low rates of growth and capacity utilisation. This article examines profit trends and cycles in historical perspective, with attention to measurement problems. It discusses various concepts of profit and their economic significance. Inflation, the associated response of interest rates, the revaluation of assets and liabilities and the interaction of these effects with the tax system affect firms financial profitability, while National Accounts profitability is important as a measure of productive efficiency in the economy. John Llewellyn and Pete Richardson Over the past few years, a number of issues have demanded increasing attention by policymakers. These include the behaviour of financial markets, the effects of expectations, the interactions of OECD economies with the developing economies, and the determinants of supply-side performance. Analysis of these issues by the OECD Secretariat has progressively been incorporated into its world model, INTERLINK. This note describes, in a non-technical way, the main features and broad preliminary conclusions of this work prior to publication of more detailed technical studies of specific aspects. Economic Studies No. 4 (Spring 1985) Special issue . The role of public sector Economic Studies No. 3 (Autumn 1984) The paper reviews the trade policies applied by developed and by developing countries in the postwar period and examines the effects of these policies on trade between the two groups of countries. Emphasis is given to trade in manufactured goods, which has been the most dynamic element of world trade. The possible interest of developed and developing countries in the liberalisation of their mutual trade is examined, with a view to establishing a policy package for multilateral trade liberalisation. Finally, matters relating to the conduct of a North-South round of trade negotiations are analysed. Robert W. R. Price and Patrice Muller Distinguishing structural from cyclical budget deficits, this paper presents estimates of structural budget deficits in OECD economies and traces them to, primarily, government debt interest payments. It also analyses recent structural budget developments in the context of monetary targeting, pressures on private savings and the growing burden of public debt and debt service, which now places severe limits on the room for fiscal manoeuvre in most OECD countries. It concludes that the budget deficit adjusted for variations both in the cycle and in the rate of inflation appears to be a more informative indicator of the fiscal stance than the budget deficit per se. John Llewellyn and Haruhito Arai This article examines the accuracy of real GNP and inflation forecasts made by the OECD Secretariat and various bodies in OECD Member countries. In many years, there is cancelling of errors across countries, so that year-ahead forecasts for OECD real GNP have been within one percentage point or so of the outcome. In a few years, however, the majority of single-country forecasts exhibited errors in the same direction, leading to large forecasting errors for OECD GNP. These occasions generally followed large, and novel, shocks to the OECD economy, whether originating inside or outside the region. Paul Masson, Adrian Blundell-Wignall, Bixio Barenco and Gerald Holtham Knowledge of the interaction between macro-economic policy and exchange rates is imperfect and incomplete. Nonetheless, there is a widespread presumption that a country can use an adjustment of its monetary andor fiscal policy to influence its exchange rate. This paper examines the scope for such usage looking at relevant qualitative, quantitative and historical evidence. Broadly it would appear that, although many other factors are at work, policies can influence exchange rates - at least if the policy adjustments are large enough and in harmony with each other. Paul Atkinson, Adrian Blundell-Wignall, Manuela Rondoni and Helmut Ziegelschmidt The recent experience with monetary targeting (particularly in countries where velocity has behaved in an unexpected way), and uncertainties implied by the unpredictable future effects of financial innovations have led to reservations about the reliability of relations between money and income. This paper considers the likely implications of financial innovations on the demand for money and uses econometric techniques to analyse the empirical stability of money demand equations in major OECD countries. There appears to be at least one monetary aggregate for which a stable demand function can be identified in each of the major OECD economies. Paul Masson, Adrian Blundell-Wignall and Pete Richardson To what extent do government deficits, by increasing the stock of debt, contribute to higher interest rates It is sometimes argued that empirical evidence of such a linkage is weak, so that, for example, expansionary fiscal policy in the United States cannot be the cause of high interest rates and of a strong dollar. This paper shows that even in the absence of debt supply effects on interest rates, increased U. S. government spending may be associated with substantial increases in long-term interest rates and in dollar strength, as the result of stronger aggregate demand and unchanged monetary targets. Economic Studies No. 2 (Spring 1984) Jean-Claude Chouraqui and Robert W. R. Price This article discusses the implications for fiscal policy effectiveness of persistent budget deficits combined with tight monetary targets. Such asymmetry in the fiscalmonetary policy mix can lead to government debt accumulation and higher debt service costs. Furthermore, when such accumulation is used to finance consumption and causes growing imbalances between government bonds andother financialassets in private portfolios, this asymmetry can cause upward pressure on interest rates. Thus the impact of fiscal policy may tend to diminish over the medium term. The OECD Secretariats world economic model determines exchange rates and capital flows using a modern portfolio balance approach which makes capital flows dependent on interest rate differentials and exchange rate expectations. By accounting in a consistent though aggregative manner for the financial flows among all OECD countries and with the rest of the world, the model determines seventeen exchange rates simultaneously. This paper reports estimation results for the system. Simultaneous-equation estimation techniques with cross-country parameter restrictions are employed, and a significant risk premium is identified whereby exchange rates depend on countries net foreign asset positions. Philip Turner and Jean-Pierre Tuveri This article reviews the implications of recent measures restraining Japanese exports. Examining aggregate export volumes, exports by commodity, and by area, it finds that such measures, unlike other forms of trade restriction, have tended to increase export prices. As these prices have been adjusted to partly offset exchange rate changes, the macroeconomic implications of changes in the yen exchange rate are altered. It also appears that avoiding trade frictions is becoming an important motive for Japanese direct investment overseas. James H. Chan-Lee and Hiromi Kato This paper compares the current simulation properties of sixteen national econometric models in active use. The analysis confronts policy-relevant theoretical issues with available empirical evidence. Issues surveyed include: crowding out, neutrality of money, priceoutput splits, inflationunemployment trade-offs and the comparative influences of monetary and fiscal policies under alternative exchange-rate regimes. At the risk of oversimplification, the behavioural properties of these models are mainly eclectic-Keynesian in inspiration. Monetary transmission mechanisms and expectations processes are relatively simpe and not dominating. Few embody fully-specified stock or wealth effects and none, the latest thinking on expectations or supply-side effects. Income measurement in economic accounts is based on actual or imputed transactions and disregards real holding gains and losses on monetary assets and liabilities, even though these occur with predictable regularity in an inflationary environment. In practice, economic agents are well aware of these gains and losses and may be systematkally taking them into account when making decisions about consumption and saving. Thus the picture of consumer behaviour provided by national accounts may be distorted, especially when inflation is accelerating or decelerating, thus leading to overstatement of the extent to which a fall in inflation is liable to stimulate personal consumption. Economic Studies No. 1 (Autumn 1983) How far is the rapid growth of Eurocurrency banking a cause for concern Flemming Larsen, John Llewellyn and Stephen Potter What - and how powervul - are the international linkages that each government needs to respect in devising its own policies and how far do they limit effective national action David T. Coe and Gerald Holtham How do changes in nominal income show up as real output on the one hand or inflation on the other What makes people and firms change their saving behaviour What do the two oil shocks tell us about the effects of changing resource prices on macroeconomic condtions and the appropriate policy responses
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